The Bank of England is rethinking parts of its proposed stablecoin framework after sustained criticism from crypto firms and financial industry participants. The Financial Times reported that Deputy Governor Sarah Breeden said regulators are reviewing holding caps and reserve requirements after companies argued the draft rules could weaken the UK’s standing in digital finance.
Original proposal set tight limits for systemic sterling stablecoins
The initial framework focused on systemic sterling stablecoins and imposed strict conditions on both users and issuers. Individuals would be allowed to hold no more than £20,000 in sterling stablecoins, while businesses would face a £10 million cap. Issuers would also have to place at least 40% of their reserves at the Bank of England, with those deposits earning no interest.
Industry participants said those terms could block stablecoins from scaling into major payment infrastructure. The concern was not limited to compliance costs. Firms also argued that large non-interest-bearing reserve deposits would reduce the commercial viability of issuing sterling-backed stablecoins at meaningful scale.
Regulators examine alternatives
Breeden said companies found the implementation process difficult, especially the use of temporary holding limits. Many firms also favored reserve structures that would let issuers keep a larger share of income-generating assets instead of parking substantial funds in non-yielding central bank deposits.
Regulators are now considering alternative measures that would still support financial stability without placing excessive pressure on issuers. That review goes to the heart of the current policy debate: whether prudential safeguards can be designed without limiting the role of sterling stablecoins in payments and tokenized finance.
US legislation adds pressure on UK policymakers
The UK review comes as the United States moves faster on stablecoin regulation. According to the report, President Donald Trump has signed the GENIUS Act into law, requiring issuers to maintain full reserve backing and make monthly disclosures. Lawmakers are also discussing broader crypto market structure legislation through the Clarity Act.
That shift has sharpened competitive pressure on British policymakers. Dollar-backed stablecoins already dominate global liquidity, while sterling-backed alternatives have yet to gain significant international traction. Former Coinbase international policy executive Tom Duff Gordon warned lawmakers that holding caps could stop sterling stablecoins from effectively supporting tokenized financial markets.
Updated draft rules are expected before the end of June, with a final framework likely later this year.