The Bank of England plans to loosen stablecoin regulations! The Vice President admits: The early proposal was too conservative

The Bank of England admits that stablecoin regulation has been overly conservative and is now re-evaluating its framework. The original proposal to impose holding limits sparked backlash, prompting the policy to shift toward a more pragmatic approach, while maintaining London’s fintech advantages.

The Bank of England shifts its stance, and stablecoin regulation policy begins to loosen

The Bank of England has shown a clear change in its regulatory position on stablecoins. Sarah Breeden, the deputy governor of the Bank of England, recently acknowledged in an interview with the Financial Times that the stablecoin regulatory plan initially proposed by the central bank “may have been too conservative,” and that it is now reassessing the original framework, with the goal of building a system that balances financial stability with industry development.

This statement has been widely viewed by the market as an important signal that the UK government and financial regulators are taking a more pragmatic approach to digital assets. Over the past year, the UK originally planned to introduce highly conservative restrictions on “systemic stablecoins,” including requiring issuers to store 40% of reserves in an interest-free form with the Bank of England, as well as setting limits on individuals’ and companies’ holdings of stablecoins. According to early drafts, the general public’s holding limit was about 20,000 pounds, while companies were capped at 10,000,000 pounds.

• Related news: Too strict! The Bank of England proposes limits on stablecoin holding caps, and the industry pushes back: violates decentralization principles

However, these measures quickly triggered strong backlash from the industry. Several fintech firms and crypto companies criticized the excessively high reserve ratio and holding limits, saying they would weaken the UK’s competitiveness as a digital-asset hub, and could also force companies to shift toward more flexible regulatory environments such as Singapore, Hong Kong, Abu Dhabi, or the United States.

Industry pressure mounts, and the UK fears losing fintech competitiveness

Breeden said the Bank of England is currently re-examining other alternative options to avoid imposing excessive restrictions on the market through the regulatory framework. She emphasized that the central bank wants to build a stablecoin system that truly works, while also ensuring the safety of users and the financial system.

The shift in the UK’s regulatory stance is linked to the rapid intensification of global competition in stablecoins. The United States has recently been accelerating efforts to push the CLARITY Act and the GENIUS Act, aiming to establish a comprehensive set of rules for stablecoin and digital-asset markets. Hong Kong has already completed its Stablecoin Ordinance and is preparing to issue its first batch of stablecoin licenses. Abu Dhabi, Singapore, and Japan have also continued to attract large financial institutions to enter the space.

In recent years, the UK government has been hoping to rebrand London as a global digital financial center, with the Treasury and the FCA gradually becoming more open in their stance toward the crypto industry. This year, the UK Financial Conduct Authority (FCA) has already launched a stablecoin regulatory sandbox, and several UK pound stablecoin issuers have entered the testing stage. The Bank of England, meanwhile, is responsible for regulating “systemic stablecoins” that may affect financial stability.

The market generally believes that if the UK maintains overly strict restrictions, large payment companies and stablecoin issuers are likely to prioritize the United States or Asian markets, further weakening London’s influence in global fintech competition.

The Bank of England still worries about bank deposit outflows and financial risk

Although the regulatory direction is starting to loosen, the Bank of England’s core concerns about stablecoins have not disappeared. Breeden has warned on multiple occasions that if stablecoins become widely adopted in the payments market quickly, it could lead to large-scale movement of bank deposits into stablecoins, further compressing banks’ lending capacity, and even triggering liquidity issues across the financial system.

The UK’s financial system is highly dependent on bank lending, unlike the financial architecture led by U.S. capital markets. The Bank of England believes that once stablecoins become everyday payment tools, bank deposits could experience a large-scale “migration” effect. Therefore, it hopes to reduce potential run risks through reserve requirements and holding limits.

Bank of England Governor Andrew Bailey has also publicly stated that global stablecoins, if lacking internationally coordinated rules, would put pressure on financial stability. He believes that the rapid expansion of dollar stablecoins could change the structure of cross-border payments and global capital flows, so regulation cannot be driven by a single country alone.

The Bank of England has not yet released the final version of the rules, but the market expects that later this year, the UK will officially open applications for systemic stablecoin licenses and adjust the original holding limits and reserve ratios.

Global stablecoin regulation is gradually moving toward a competition model

The policy shift in the UK also reflects the global trend in stablecoin regulation moving from risk prevention to balancing market competition and financial innovation. On the one hand, central banks and regulators worry that stablecoins could affect the banking system and monetary policy; on the other hand, they also fear missing out on digital finance development opportunities in their own markets.

Especially after the United States accelerates stablecoin legislation, major European and Asian financial centers have begun to recalibrate their strategies. In recent times, Hong Kong, Singapore, Abu Dhabi, Japan, and the UK have issued open signals almost in sync, hoping to attract more payment companies, trading platforms, and financial institutions to build stablecoin infrastructure locally.

Breeden’s latest remarks also show that attitudes toward stablecoins inside the Bank of England have gradually changed. The market will next watch whether the UK will reduce the reserve ratio, remove holding limits, or allow more flexible designs for stablecoin reserve assets. These adjustments will directly affect whether the UK can retain its status as a financial center in global digital-asset competition.