The Bank of England is preparing to soften parts of its proposed stablecoin framework after mounting pressure from crypto firms and financial industry participants, according to comments from UK central bank’s Deputy Governor Sarah Breeden.
According to a Financial Times report, Breeden said the central bank is reconsidering some of its earlier proposals after feedback suggested the measures may have been “overly conservative.”
“We are keen to create a regime where stablecoins can succeed and can deliver benefits to users,” Breeden said. “But it is money, and we want to make sure that this new form of money is safe.”
Stablecoin ownership caps under review
One of the key proposals now under review is the Bank of England’s planned ownership limits for UK-issued stablecoins.
Under the original framework, individuals would have been temporarily restricted to holding no more than £20,000 per stablecoin, while businesses would face a £10 million cap. The measures were designed to prevent large-scale outflows of deposits from traditional banks into digital assets.
Meanwhile, earlier in March, Bank of England Deputy Governor Sarah Breeden said the central bank could soften proposed stablecoin limits following criticism from the crypto industry.
However, Breeden acknowledged industry concerns that the proposed system would be operationally difficult to implement.
“What we have heard from industry is that the way we have proposed to implement limits is cumbersome operationally for a temporary measure,” she explained, adding that officials are now exploring alternative approaches.
Central Bank eases reserve requirements
The Bank of England is also reconsidering its proposal requiring at least 40% of stablecoin reserves to be held directly at the central bank without earning interest.
Crypto companies argued that the rule would make UK-issued stablecoins significantly less profitable compared with products operating under more flexible U.S. regulations.
Breeden said the requirement was initially based on stress scenarios observed during the 2023 Silicon Valley Bank collapse and other liquidity events.
“It was based on the experience of potential liquidity stress,” she said. “But we will look hard to see if we have been overly conservative in our thinking there.”
Pressure to stay competitive
Industry participants have warned that strict regulations risk pushing innovation and investment away from the UK as global competition for digital asset leadership intensifies.
Sterling-backed stablecoins currently account for less than 0.5% of the roughly $315 billion global stablecoin market, highlighting how far the UK still trails the U.S. dollar-dominated ecosystem.
The latest comments suggest the Bank of England is attempting to strike a balance between supporting financial innovation and preventing risks to the traditional banking system.
Broader financial stability concerns
Alongside stablecoin policy, Breeden also discussed broader concerns around market resilience, including reforms to the UK’s repo and sovereign bond markets.
She defended proposals aimed at increasing central clearing and introducing additional safeguards in government bond financing markets, arguing that “a little bit of insurance paid in the good times” could help strengthen the financial system during future crises.
Breeden also downplayed fears that ongoing geopolitical tensions in the Middle East would trigger a major inflation spiral similar to the economic shock that followed Russia’s invasion of Ukraine in 2022.
Also read: Asia’s Stablecoin Race Heats Up as India Risks Falling Behind Now
