The Bank of England is planning to dilute its proposed regulations for stablecoins, replacing earlier planned individual holding limits with an overall issuance cap of £40 billion per issuer. This change comes after significant pressure from the digital asset industry, which argued that the original rules, including per-user limits of £20,000 for individuals and £10 million for businesses, were operationally unworkable and would hinder the growth of sterling-backed stablecoins. The relaxed approach aims to foster competition and innovation in a "multi-money system" while ensuring stability.
Deputy Governor Sarah Breeden indicated the Bank's willingness to reconsider its initial approach, acknowledging that previous proposals might have been "overly conservative." The new aggregate issuance cap mirrors regulatory frameworks in the US and EU, placing the limit directly on the issuer rather than individual users. This shift is seen as crucial for the commercial viability of sterling stablecoins, allowing for greater scalability and easing concerns about enforcing per-wallet balances across decentralized networks.
In addition to the holding limits, the Bank of England is also re-evaluating its stringent reserve requirements. Initially, proposals mandated that 40% of stablecoin backing assets be held in non-interest-bearing deposits at the Bank of England, with the remainder in short-term UK government debt. Industry participants had warned that this requirement, stricter than those in the US, would significantly reduce profitability for UK-issued stablecoins. Any relaxation of these reserve rules could make regulated GBP-backed tokens more attractive for payments, treasury management, and settlement, potentially preventing stablecoin activity from migrating to more commercially flexible jurisdictions. The Bank aims to finalize these rules by year-end, aligning with the US timeline for stablecoin regulation.
