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The Bank of England is reconsidering parts of its proposed regulatory framework for pound-denominated stablecoins.
The move follows industry criticism that the rules including strict reserve requirements and caps on holdings.
The proposals, first published in late 2025, aim to regulate systemic stablecoins, or digital tokens pegged to the British pound that could be widely used for payments.
Regulators argue that the rules are necessary to protect financial stability as digital currencies begin to intersect more closely with the traditional banking system.
However, crypto firms and fintech stakeholders warn that overly conservative policies could discourage stablecoin development in the UK at a time when global competition for digital finance leadership is intensifying.
The regulatory framework proposed by the Bank of England focuses on stablecoins that could become widely used in payments a category the bank calls systemic stablecoins.
Under the plan, issuers would be required to hold at least 40% of their reserves as non-interest-bearing deposits at the central bank, with the remaining 60% allowed in short-term UK government debt.
The central bank says the approach is designed to ensure stablecoin issuers can handle sudden redemption demands without triggering market panic or undermining trust in digital money.
“Today’s proposals mark a pivotal step towards implementing the UK’s stablecoin regime next year. Our objective remains to support innovation and build trust in this emerging form of money.” Breeden said in the central bank’s consultation announcement.
The proposed framework also includes holding limits of £20,000 per coin for individuals and £10 million for businesses, intended to prevent large-scale shifts of bank deposits into digital tokens that could disrupt the lending system.
Officials say these caps would be temporary and could be lifted once the financial system adapts to digital currencies.
The proposed limits have sparked debate across the crypto and fintech sectors. Industry groups argue that the rules could make the UK less attractive than jurisdictions such as the United States or the European Union, where regulatory approaches to stablecoins may be more flexible.
Critics say the combination of reserve requirements and ownership caps could limit the economic incentives for companies to launch sterling-based stablecoins, potentially slowing adoption.
Etay Katz, head of digital assets at the law firm Ashurst, noted that the rules may appear restrictive but could ultimately strengthen confidence in the sector.
“These proposed steps, whilst looking harsh at first glance, will benefit systemic stablecoins in the medium and long term to become a trustworthy method of value exchange.” – Katz said.
The debate reflects a broader global challenge: how to regulate stablecoins without stifling the technological innovation that has made them one of the fastest-growing sectors in digital finance.
Stablecoins digital tokens typically backed by fiat currencies, now represent a market worth hundreds of billions of dollars globally, dominated by US-dollar-linked tokens such as USDT and USDC.
Central banks worldwide have become increasingly cautious about stablecoins because of their potential impact on financial stability.
If widely adopted, these tokens could compete with traditional bank deposits, which play a key role in funding loans to households and businesses.
Andrew Bailey has repeatedly emphasized that widely used stablecoins must meet the same standards as traditional money.
“Widely-used stablecoins need to be regulated like money.” – Bailey said in remarks reported earlier in 2025.
The central bank is also exploring alternatives such as tokenized bank deposits, which could combine blockchain technology with traditional banking infrastructure.
Regulators argue that clear rules will ultimately benefit both investors and businesses by creating a predictable environment for digital asset innovation.
The consultation period for the proposed framework ran until February 2026, after which the central bank will review feedback from industry participants, financial institutions, and technology firms.
Final rules are expected to be published in the second half of 2026, setting the regulatory foundation for sterling-denominated stablecoins in the UK.
The outcome could shape whether the United Kingdom becomes a major hub for stablecoin innovation.
As governments and central banks establish new rules, the regulatory frameworks created today could determine how digital money is issued, traded and trusted in the decade ahead.
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