The Bank of England (BoE) will not lift its proposed limits on stablecoin holdings until it is confident that large-scale movement of deposits from traditional banks into digital assets won’t threaten the UK’s financial stability, according to a Reuters report published on October 15.
The central bank’s stance underscores its cautious approach to digital finance as it works to integrate stablecoins into the broader financial system without jeopardizing liquidity or credit supply.
BoE Prioritizes Financial Stability Over Rapid Adoption
Speaking at an industry event, Deputy Governor Sarah Breeden warned that unrestricted stablecoin adoption could lead to a massive outflow of deposits from commercial banks, reducing their ability to lend to households and businesses.
“Our priority is ensuring that the transition to digital money does not impair credit provision to the real economy,” Breeden emphasized.
The Bank of England’s current proposal includes strict thresholds on how much stablecoin individuals and corporations can hold at any given time.
Earlier drafts suggested caps of £10,000 to £20,000 for individuals and up to £10 million for businesses, though major firms could receive exemptions to accommodate settlement and operational needs.
A Dual-Regulator Framework for Stablecoins
Under the UK’s proposed digital asset regulatory framework, the Bank of England would supervise systemic sterling-backed stablecoins those that could be widely used for payments or potentially impact financial stability.
Meanwhile, the Financial Conduct Authority (FCA) would oversee smaller, non-systemic stablecoin issuers under a lighter-touch regime, maintaining proportional oversight based on risk.
This dual-regulator model aims to strike a balance between innovation and prudence, ensuring that stablecoins can coexist with traditional money without destabilizing the financial sector.
Developing a Resolution Plan for Stablecoin Failures
Beyond setting caps, the BoE is also working closely with the UK Treasury to establish a resolution framework for stablecoin issuers effectively a “safety net” for potential collapses.
This plan would outline how to manage the failure of a major stablecoin provider while maintaining continuity of payments and protecting consumers.
The move comes in response to the growing concern that a large stablecoin failure could ripple through the financial system, similar to how bank runs or money market fund crises once did.
Balancing Innovation and Risk
Breeden’s remarks follow a Bloomberg report last week suggesting the BoE might introduce exemptions for certain large firms a signal that regulators are responding to industry pressure to avoid over-regulation.
Still, the central bank remains firm that risk mitigation must come first, especially as the UK positions itself as a global hub for digital asset innovation.
The BoE’s measured approach contrasts with recent moves in the United States, where the GENIUS Act has provided a clearer though still evolving pathway for dollar-backed stablecoins.
“We’ll lift the limits once we’re confident the system can absorb stablecoin growth without harming credit provision,” Breeden said.
Outlook: A Gradual Path to Stablecoin Integration
The UK’s cautious rollout signals that full-scale stablecoin adoption will likely unfold over several years rather than months.
By setting early safeguards, the Bank of England hopes to build trust in tokenized money while preventing unintended consequences for banks, borrowers, and investors alike.
As regulatory frameworks mature and the risks become better understood, the BoE could eventually ease restrictions, paving the way for stablecoins to play a central role in payments and finance but only once financial stability is fully assured.
