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 has been overly conservative and is now reassessing its framework. The original plan to impose holding restrictions sparked backlash, prompting the policy to shift toward a more pragmatic approach while maintaining London’s fintech advantage.

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

A clear change has emerged in the Bank of England’s regulatory position on stablecoins. In a recent interview with the Financial Times, the Bank of England’s Deputy Governor Sarah Breeden admitted that the stablecoin regulatory proposal originally put forward by the central bank “may have been overly conservative” and that it is now re-evaluating the existing framework, aiming to establish a system that balances financial stability with industry development.

These remarks have been viewed by the market as an important signal that the UK government and financial regulators are taking a more pragmatic stance toward digital assets. Over the past year, the UK had originally intended to impose highly conservative restrictions on “systemic stablecoins,” including requiring issuers to place 40% of reserves with the Bank of England in an interest-free form, while also setting holding limits for individuals and businesses. Under the early draft, the holding limit for the general public was about 20,000 pounds sterling, while for companies it was capped at 10,000,000 pounds sterling.

• Related news: Too strict! Bank of England proposes limits on stablecoin holdings; industry pushes back, saying it violates decentralization principles

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

Industry pressure intensifies; the UK worries about losing fintech competitiveness

Breeden said the Bank of England is currently reworking alternative options to avoid the regulatory framework imposing excessive restrictions on the market. 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 UK regulatory stance is related to the rapid intensification of global stablecoin competition. The United States has recently been accelerating efforts to advance the CLARITY Act and the GENIUS Act, hoping to establish comprehensive 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; and Abu Dhabi, Singapore, and Japan are also continuing to attract major financial institutions to enter the market.

In recent years, the UK government has consistently hoped to rebuild London as a global digital financial center, and the Treasury and the FCA have gradually taken a more open 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 moved into the testing phase. The Bank of England, meanwhile, is responsible for regulating “systemic stablecoins,” which could affect financial stability.

Market participants generally believe 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 has begun 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 cause large volumes of bank deposits to flow into stablecoins, further compress banks’ lending capacity, and even lead to liquidity issues across the financial system.

The UK’s financial system relies heavily on bank lending, unlike the financial structure in the United States dominated by capital markets. The Bank of England believes that if stablecoins become a daily payment tool, bank deposits could experience a large-scale “moving effect,” so it hopes to reduce potential run risk through reserve requirements and holding limits.

UK central bank Governor Andrew Bailey has also previously publicly said that global stablecoins lacking internationally coordinated rules would create 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 led solely by one country.

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

Global stablecoin regulation is gradually moving toward a competitive model

The policy shift in the UK also reflects that global stablecoin regulation is gradually moving from risk prevention to a more balanced approach that considers both market competition and financial innovation. On one hand, central banks and regulators in various countries worry that stablecoins will impact the banking system and monetary policy; on the other hand, they also worry about missing out on digital financial development opportunities in their own markets.

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

Breeden’s latest remarks also indicate that attitudes toward stablecoins within the Bank of England are gradually changing. Markets will next focus on whether the UK will reduce the reserve ratio, remove holding limits, or allow a more flexible design 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.