The Bank of England is preparing to ease its proposed restrictions on stablecoin holdings following sustained criticism from digital asset industry participants who argued the rules risked undermining the United Kingdom's competitiveness in the emerging digital economy, according to a Financial Times report Thursday.

Sarah Breeden, the BOE's deputy governor for financial stability, acknowledged that initial plans to cap individual stablecoin holdings at £20,000 ($27,000) per coin may have been "overly conservative." The central bank is now actively exploring alternative approaches to managing what it views as legitimate risks as stablecoins move toward mainstream adoption.

Market Context

The U.K. has been working to establish a regulatory framework for stablecoins as part of broader digital asset legislation, positioning itself as a potential global hub for cryptocurrency innovation. However, the BOE's restrictive proposals drew immediate pushback from industry participants who argued the rules were more stringent than comparable frameworks in markets such as the United States, potentially driving business elsewhere.

Stablecoins—cryptocurrencies pegged to traditional financial assets, predominantly the U.S. dollar—have become central to digital asset trading and payments infrastructure. Their reliability depends on issuers maintaining adequate reserves and meeting redemption obligations, making reserve requirements a critical regulatory concern.

Analysis

The BOE's apparent willingness to revisit its position reflects the tension between financial stability concerns and industry competitiveness pressures. Breeden indicated that the proposed holding cap, which the central bank characterized as "temporary," faced operational challenges that made implementation cumbersome for businesses operating at scale.

"What we have heard from industry is that the way we have proposed to implement limits is cumbersome operationally for a temporary measure," Breeden said in an interview with the Financial Times. "So we are genuinely open to thinking whether there are other ways of achieving our objective."

The central bank also signaled openness to lowering its planned requirement that at least 40% of stablecoin-backing assets be deposited with the BOE earning no interest, with the remaining 60% invested in short-term U.K. government debt. Industry participants have consistently argued this allocation would reduce yields available to stablecoin issuers and their customers.

Katie Haries, Coinbase's head of policy for Europe, welcomed the signals from Threadneedle Street. "We’ve said for a long time that a cap on stablecoin holdings is a cap on innovation, with real and significant risks for UK competitiveness," she said in an emailed comment.

Key Numbers

- £20,000 ($27,000) per coin: Original proposed individual holding limit that Breeden called potentially "overly conservative"

- 40%: Proposed minimum share of stablecoin reserves required to be deposited at the BOE without earning interest

- 60%: Proposed allocation to short-term U.K. government debt in original reserve requirement framework

What to Watch

Traders should monitor for formal BOE announcements revising the proposed stablecoin framework, particularly regarding holding limits and reserve requirements. The timeline for finalizing U.K. stablecoin legislation remains a key catalyst, as industry participants have warned that overly restrictive rules could delay or derail plans to establish London as a European digital asset center.

Specific attention should be paid to how any revised framework compares with emerging regulatory standards in the European Union under MiCA and evolving U.S. Securities and Exchange Commission guidance. The BOE's final position on reserve composition will be particularly significant for issuers targeting the U.K. market, given implications for yield generation and operational costs.