The United Kingdom is softening its approach to stablecoin regulation as it seeks to balance financial stability with ambitions to become a hub for digital asset innovation.
The Bank of England has unveiled revised rules for systemic stablecoin issuers, lowering reserve requirements and scrapping proposed holding limits that had drawn criticism from lawmakers and the crypto industry.
Under the updated framework, issuers will be required to hold at least 30% of their reserves in non-interest-bearing deposits at the Bank of England, down from an earlier proposal of 40%. They will also be allowed to keep up to 70% of reserves in short-term UK government debt, giving them greater flexibility in managing capital.
The changes mark a notable shift from the Bank’s original stance, which many industry participants described as overly restrictive. Earlier proposals included strict limits on how much stablecoin users could hold and tougher reserve requirements that critics argued would make sterling-backed stablecoins less competitive than their US counterparts.
Rather than imposing user-level holding caps, the Bank now plans to introduce a temporary £40 billion limit on total issuance for each systemic stablecoin. The move is intended to support innovation while addressing concerns that large-scale stablecoin adoption could pull deposits away from traditional banks and affect lending activity.
The revised framework arrives as governments worldwide race to establish rules for stablecoins, a sector that has become one of the fastest-growing areas of digital finance. While the market remains dominated by dollar-backed tokens such as USDT and USDC, British policymakers hope clearer regulation can encourage the growth of sterling-denominated alternatives.
The proposals remain open for consultation before final rules are adopted, but the Bank expects the regime to pave the way for regulated UK stablecoins from 2027.
As stablecoins increasingly move from crypto trading into mainstream payments, the UK’s latest policy adjustment signals that regulators are becoming more willing to accommodate digital money,provided it comes with safeguards designed to protect consumers and the wider financial system.
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