When the Bank of England first sketched out how it would regulate stablecoins, the industry read the draft and recoiled. Caps on how much any one person could hold, conservative rules on what the coins could be backed by: critics said the regime would make real-world use almost impossible and send, in the words of one group, a terrible signal about whether Britain wanted the business at all.
The most visible retreat is on holding limits. The Bank had proposed capping individual holdings of any systemic sterling stablecoin at around £20,000, with a £10mn limit for businesses, a mechanism meant to stop money rushing out of bank deposits and into tokens fast enough to choke off lending to the real economy.
That per-person cap is gone. In its place the Bank will apply a temporary issuance limit to each systemic stablecoin, a ceiling on how much a single issuer can put into circulation rather than a tally kept on every wallet.
The reserve rules have softened too. The original plan leaned toward requiring issuers to park backing assets as unremunerated deposits at the Bank, an arrangement shaped by the kind of liquidity stress seen in the 2023 bank runs, including the collapse of Silicon Valley Bank.
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Issuers complained that holding reserves that earn nothing makes the economics of a regulated stablecoin barely work. The revised regime gives them more room, allowing a larger share of backing to sit in short-term UK government debt that actually pays a yield.
The Bank has not pretended the change of heart came from nowhere. Deputy Governor Sarah Breeden acknowledged that the initial proposals may have been “overly conservative,” an unusually direct admission for a central bank, and the framing throughout the new framework is about safeguarding financial stability without strangling a market the government wants London to host.
The Bank’s work on this sits under Sasha Mills, its executive director for financial market infrastructure, who has spent the past year arguing that stablecoins and tokenised money are a form of innovation the UK should shape rather than resist. The political backdrop matters here too.
Ministers have been vocal about wanting the UK to be a hub for digital assets, and a regime visibly tougher than Washington’s, where a federal stablecoin law has already given issuers a clearer runway, risked pushing firms across the Atlantic.
What has not changed is the underlying worry. The whole reason systemic stablecoins draw this level of scrutiny is that a token used widely enough for payments starts to look like money, and money that can be redeemed in a panic can move faster than the banking system can absorb.
The Bank’s concern about deposits draining out of lenders is real; it has simply decided that an issuance cap is a less blunt instrument than a limit on what individuals can hold. Whether that proves true is something only a stressed market will reveal.
It is a debate TNW has tracked as the money has gotten serious, from Mastercard’s $1.8bn move into stablecoin infrastructure to JPMorgan’s tokenised funds on Ethereum, against a long-running argument that the sector could wreak havoc on the financial system if it scales without guardrails.
The Bank’s revised stance is an attempt to keep both things true at once.
The framework is not yet final. The Bank is taking feedback until 22 September 2026 and intends to confirm its Code of Practice by the end of the year, with regulated stablecoins expected to be able to operate in the UK from 2027. For now, the signal the industry wanted has been sent.
The harder test, of whether a lighter regime can hold when a token the size of a small bank starts to wobble, is still to come.
