The Bank of England (BoE) is rolling back key parts of its proposed stablecoin rules after the digital asset industry pushed back strongly against suggestions that officials now admit may have gone too far.
Key Points
- BoE Deputy Governor Sarah Breeden told the Financial Times that personal ownership limits on sterling stablecoins may have been “too conservative.”
- The central bank plans to lower a 40% reserve requirement for stablecoins held at the BoE, which is stricter than U.S. rules and hurts profitability.
- Breeden indicated no urgency to raise rates in June or July 2026, despite markets pricing 2-3 hikes this year.
BoE Reconsiders Stablecoin Rules Amid Industry Criticism
Sarah Breeden, the deputy governor responsible for financial stability at the UK central bank, told the Financial Times (FT) that the BoE is “looking very carefully at whether there are different ways to manage what we think is an important risk as stablecoins become a reality.” She expressed openness to adjusting the proposed ownership limits.
The BoE had proposed capping individual holdings of sterling-pegged stablecoins at £20,000 and businesses at £10 million to prevent large deposit outflows from banks. Industry groups called these limits “operationally onerous.” Breeden directly acknowledged the criticism: “We are genuinely open to the idea of whether there are alternative ways to achieve our objective,” she told the FT.
The central bank is also reconsidering a rule requiring at least 40% of stablecoin backing assets to be held as zero-interest central bank deposits, with the remainder in sovereign bonds and other liquid assets. The FT noted this is far stricter than U.S. regulations, making UK-registered stablecoins less profitable to operate.
Breeden said the 40% figure came from studying withdrawal speeds during the collapse of Silicon Valley Bank in 2023 and other recent stress events. “It was based on experience of potential liquidity stress,” she explained. “But we will scrutinize whether we were too conservative in our thinking there.”
Currently, sterling-backed stablecoins account for less than 0.5% of the global stablecoin market, worth over $320 billion. Crypto firms have warned the UK risks losing ground in the race to build a competitive digital asset sector.
Monetary Policy and QT Under Scrutiny
On separate monetary policy questions, Breeden pushed back against expectations for near-term rate moves. Markets are currently pricing two or three UK interest rate hikes in 2026, with the first expected as early as summer. But Breeden told the FT that timeline is not binding. “We have time to understand the magnitude of shocks first, and second, how the economy is evolving. You’re right that we can’t wait forever, but we don’t need to do it in June or July,” she said.
Breeden also noted in the interview that she sees limited risk of the Middle East conflict producing the kind of persistent wage-price spiral seen after Russia’s invasion of Ukraine in 2022. She cited a softer labor market and restrictive monetary policy as factors reducing that risk.
The BoE is under pressure regarding its ongoing quantitative tightening program, which involves unwinding a £525 billion bond portfolio. The central bank estimated last year that the process adds 0.15-0.25 percentage points to long-term interest rates, a figure Breeden described as “not huge.”
The revised stablecoin framework has no completion timeline, but Breeden’s statements to the Financial Times suggest the BoE is prepared to move away from its original approach before any rules take effect.