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

The Bank of England has admitted that stablecoin regulation is too conservative and is re-evaluating the framework. The originally proposed holding restrictions triggered pushback, prompting a shift toward a more pragmatic approach that preserves London’s fintech advantage.

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

The Bank of England’s regulatory position on stablecoins has shown a clear shift. Sarah Breeden, Deputy Governor of the Bank of England, recently told Financial Times in an interview that the stablecoin regulatory plan initially put forward by the central bank “may have been too conservative,” and that it is now re-assessing the existing framework. The goal is to establish a system that balances financial stability with industry development.

These remarks are widely seen in the market as an important signal that the UK government and financial regulators are further turning toward a more pragmatic attitude toward digital assets. Over the past year, the UK had originally intended to impose highly conservative restrictions on “systemic stablecoins,” including requiring issuers to hold 40% of reserves in a non-interest-bearing form with the Bank of England, and setting limits on individuals’ and businesses’ holdings of stablecoins. According to early drafts, the general public’s holding limit was about 20,000 pounds sterling, while corporate holdings were capped at 10,000,000 pounds sterling.

• Related news: Extremely strict! The Bank of England proposes limits on stablecoin holdings; the industry pushes back: violates decentralization principles

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

Industry pressure intensifies, as the UK worries about losing fintech competitiveness

Breeden said the Bank of England is currently re-studying other alternative options, with the aim of avoiding excessive restrictions on the market caused by the regulatory framework. She emphasized that the central bank wants to build a stablecoin system that can truly work, while also ensuring the safety of users and the financial system.

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

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

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

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

Although the regulatory direction is starting to loosen, the Bank of England’s core concerns about stablecoins have not disappeared. Breeden has warned multiple times in the past that if stablecoins rapidly become widely used in the payments market, it could lead to large-scale bank deposits flowing into stablecoins. This would further squeeze banks’ lending capacity and could even trigger liquidity issues across the financial system.

The UK’s financial system relies heavily on bank lending, unlike the US financial architecture led by capital markets. The Bank of England believes that once stablecoins become everyday payment tools, bank deposits could face a large-scale “moving” effect. Therefore, it hopes to reduce potential run-like pressures through reserve and holding restrictions.

Bank of England Governor Andrew Bailey also previously said publicly that if global stablecoins lack internationally coordinated rules, they will put pressure on financial stability. He believes that the rapid expansion of dollar stablecoins may change the structure of cross-border payments and global capital flows, so regulation cannot be led by a single country alone.

The Bank of England has not yet published 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 make adjustments to the original holding restrictions and reserve ratios.

Global stablecoin regulation is gradually shifting toward a competitive model

The UK policy shift also reflects a broader global trend: stablecoin regulation is gradually moving from pure risk prevention to balancing market competition with financial innovation. Central banks and regulators are concerned about stablecoins disrupting the banking system and monetary policy, but they also worry about missing opportunities for digital financial development in their own markets.

Especially after the US accelerates stablecoin legislation, major financial centers in Europe and Asia have begun to readjust their strategies. Hong Kong, Singapore, Abu Dhabi, Japan, and the UK have recently issued signals of openness, aiming to attract more payment companies, trading platforms, and financial institutions to build stablecoin infrastructure locally.

Breeden’s latest remarks also show that the Bank of England’s internal attitude toward stablecoins is gradually changing. The market will next watch whether the UK will reduce reserve ratios, remove holding limits, or allow more flexible designs for stablecoin reserve assets. These adjustments will directly determine whether the UK can maintain its status as a financial center in the global digital asset race.