Bank of England to ease sterling stablecoin rules

The Bank of England has said it will relax parts of a draft framework for “systemic” sterling stablecoins after industry feedback. Officials are reconsidering proposed holding caps and the requirement that 40% of issuer reserves be kept at the central bank without earning interest.

The consultation, launched in November, proposed capping individual holdings at £20,000 and business holdings at £10 million. Under the draft, at least 40% of reserves would be held at the Bank of England and the remainder would be limited to short-term UK government debt or other liquid assets.

Deputy Governor Sarah Breeden acknowledged the draft may have been “overly conservative” and said the Bank is “looking very hard” at alternatives to how the limits and reserve split would work in practice. She said industry participants raised operational concerns and prefer holding more interest-earning assets.

Industry voices told regulators the proposed holding caps could prevent sterling stablecoins from scaling into settlement infrastructure for tokenized markets. A former Coinbase policy executive argued the limits would stop sterling stablecoins from becoming meaningful settlement rails. A digital assets lawyer welcomed the prospect of easing the rules but warned that separate Treasury and Financial Conduct Authority proposals, especially rules on merchant integration of non-UK stablecoins, could still create major obstacles.

The Bank said it is considering lowering the 40% reserve requirement and exploring other ways to meet its objectives. Updated draft rules are expected before the end of June, with a final framework planned later in the year. Non-sterling stablecoins and tokens mainly used for trading would remain under the Financial Conduct Authority’s oversight.

The review comes as U.S. lawmakers advance their own stablecoin measures, including a law requiring full reserve backing and monthly disclosures for issuers, and as global standards are under discussion. Bank of England Governor Andrew Bailey has warned that international regulators may clash with U.S. authorities over stablecoin rules. The Bank says it will weigh industry feedback as it finalizes the framework.