The Bank of England is reviewing parts of its proposed stablecoin framework after crypto firms warned that strict rules could make UK-issued stablecoins harder to use at scale.
The review focuses on two major issues: limits on how much sterling stablecoin users can hold and rules requiring issuers to keep a large share of reserves at the central bank.
According to the Financial Times, Bank of England Deputy Governor Sarah Breeden said officials are reassessing whether temporary holding caps are needed. The central bank is also reviewing whether its reserve requirements may be too restrictive for stablecoin issuers.
Holding Caps Face Industry Pushback
Under the Bank of England’s November 2025 proposal, individuals would have been limited to holding £20,000 of a single UK stablecoin during an initial transition period.
Corporate users would have faced much larger limits, reportedly around $13.5 million.
The central bank said these caps were designed to reduce financial stability risks. Officials were concerned that if stablecoins became widely used for payments, money could move too quickly out of commercial bank deposits.
However, crypto firms and legal advisers argued that such caps would be difficult to enforce. Stablecoins can move across wallets, exchanges, apps, and decentralized platforms, making user-level limits hard to monitor in practice.
Reserve Rules May Also Be Relaxed
The Bank of England’s earlier proposal also required stablecoin issuers to keep at least 40% of backing reserves in non-interest-bearing deposits at the central bank.
The remaining reserves would be held in short-term UK government debt.
Industry groups pushed back against this requirement as well. They argued that forcing issuers to park a large share of reserves at the central bank without earning interest could make UK stablecoin businesses less profitable.
That could discourage companies from issuing pound-backed stablecoins and push more activity toward dollar-backed tokens instead.
UK Tries to Balance Safety and Competitiveness
The debate shows the challenge facing UK regulators. On one side, the Bank of England wants stablecoins to meet strong safety standards, especially if they are used like money in everyday payments.
On the other side, overly strict rules may make the UK less attractive for stablecoin companies.
Sarah Breeden has previously said that money-like digital assets should meet standards similar to traditional payment systems. That cautious view remains important, especially because stablecoins can face redemption pressure during periods of market stress.
Global Stablecoin Rules Remain Divided
The UK’s review comes as global regulators continue debating how stablecoins should be supervised.
Bank of England Governor Andrew Bailey recently warned that international regulators may face difficult talks with the United States over stablecoin oversight. He said global payment use cases would require common international standards.
His comments came as the U.S. continued supporting stablecoin growth through the GENIUS Act, which created a framework for issuers.
The global stablecoin market is now worth more than $317 billion, with dollar-backed stablecoins still dominating the sector.
Sterling Stablecoins Remain Small
For now, pound-backed stablecoins represent only a small part of the global stablecoin market. Most crypto trading, settlement, and treasury activity still relies on U.S. dollar stablecoins.
That could change if the UK creates rules that are safe but still commercially workable.
If the Bank of England relaxes holding caps or reserve requirements, regulated sterling stablecoins may become more useful for payments, treasury management, and settlement.
But if the rules remain too strict, firms may continue choosing dollar-backed tokens over UK-issued alternatives.
What This Means for UK Crypto Firms
The Bank of England’s review does not mean the UK is abandoning strict stablecoin oversight. Instead, it suggests regulators may be willing to adjust the framework to avoid limiting innovation too much.
For crypto firms, the outcome could shape whether the UK becomes a serious market for regulated pound-backed stablecoins.
For users, the rules will determine whether sterling stablecoins can become practical payment tools or remain a small niche product in a market still dominated by the U.S. dollar.
