BoE Blinks on Stablecoin Rules

The Bank of England just admitted its first draft was too aggressive. Deputy Governor Sarah Breeden told the Financial Times the original proposals may have been "excessively cautious." The industry pushed back hard, and the central bank is now genuinely reconsidering .

🔹 The Caps Under Fire
The original plan proposed a £20,000 holding limit for individuals and £10 million for businesses . The goal was preventing bank deposit flight. Industry groups fired back immediately. Crypto firms and payment companies argued these caps would make stablecoins useless for real-world payments and push activity offshore .

Breeden told the House of Lords in March the BoE is "genuinely open to other ways" of achieving its objectives . The caps were always meant as temporary measures, but enforceability concerns are making the current form increasingly difficult to defend .

🔹 The Reserve Requirement Problem
The second major battle is the 40% unremunerated deposit rule. Issuers would hold nearly half their backing assets at the central bank earning zero interest . The BoE defends this as grounded in stress events like the SVB collapse and USDC depeg .

Industry argues this is a structural drag that dollar-denominated competitors in other jurisdictions do not face . Issuers simply launch elsewhere if the economics do not work. The Bank is now reviewing alternatives .

🔹 The UK's Dual-Track System
Stablecoin regulation in the UK runs on two tracks. The FCA handles conduct and authorization for qualifying stablecoins. The BoE only steps in when HM Treasury recognizes an issuer as systemic .

The FCA application window opens September 30, 2026 and closes February 28, 2027 . Draft Codes of Practice from the BoE are expected in the second half of 2026 . The dual structure means issuers must prepare for two regulatory frameworks running in parallel.

🔹 The Broader Signal
BoE Executive Director Sasha Mills recently called stablecoins a "new form of money" . The central bank will open applications for systemically important stablecoins by year-end . The UK is drawing a line between crypto trading use, which stays largely untouched, and payment integration, which faces higher compliance bars .

Circle stock surged on the news. The market is reading this as a green light for GBP-backed stablecoin adoption in 2026, assuming the final rules match the softer rhetoric .

The Bottom Line
The BoE proposed strict caps and expensive reserve rules. Industry pushed back hard. Deputy Governor Breeden now says the bank is "genuinely open" to alternatives. The £20,000 retail cap looks unlikely to survive in its current form. The 40% unremunerated deposit rule may get revised rather than scrapped. The UK wants to be a digital asset hub, and flexible stablecoin rules are the price of admission.

Friends, do you think the BoE will fully drop the holding caps or just raise the limits?

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