TLDR
The Bank of England is signalling it may soften parts of its proposed regime for large sterling stablecoins after criticism that the rules are too restrictive.
- Officials are reconsidering strict caps on how much systemic stablecoins individuals and businesses can hold, and are open to alternative safeguards.
- The current design, including unremunerated reserve requirements and a ban on UK systemic stablecoins in unhosted wallets, could reshape how GBP stablecoins work for issuers, banks, and users.
- A live consultation and a House of Lords inquiry mean the final rule set could shift, with clarity likely later in 2026 as applications to issue GBP stablecoins open.
Deep Dive
1. What The BoE Is Rethinking
In a recent hearing, Deputy Governor Sarah Breeden said the Bank is genuinely open to other ways of regulating systemic stablecoins, not just hard caps on holdings. That followed industry criticism of proposed temporary limits around 20,000 for individuals and 10 million for businesses, designed to avoid a rapid shift of deposits from banks into stablecoins and a squeeze on bank lending to the real economy, as described in a sterling stablecoin consultation summary.
The draft framework also requires 40 percent of reserves to sit as non interest bearing deposits at the central bank, with the rest in short term UK government debt, to reduce liquidity and credit risk, according to analysis of the BoE plan for sterling stablecoins.
The core goals of safety and bank stability remain, but the specific levers, especially caps, are now up for negotiation.
2. Why It Matters For Crypto And Banks
Industry groups argue that strict caps and heavy reserve demands could make GBP stablecoin business models uneconomic and push innovation offshore, while still limiting usefulness in everyday payments. At the same time, the BoE wants any stablecoin used as money in the UK economy to be as robust as commercial bank money, and plans to let systemic issuers hold accounts at the central bank with clearly defined collateral rules for tokenized assets and wholesale settlement, as outlined in a recent briefing.
Breeden also indicated that systemic sterling stablecoins held in self custody unhosted wallets would not be permitted under the UK regime, unlike in the United States, which has big implications for DeFi style uses and non custodial users.
UK friendly GBP stablecoins may look more like tightly supervised bank money than permissionless crypto dollars, especially for systemic scale issuers.
3. What To Watch Next
The original consultation on systemic sterling stablecoins, published in November, runs alongside an inquiry by the House of Lords Financial Services Regulation Committee into whether the BoE and FCA regimes are proportionate, as noted in the parliament focused coverage.
The FCA is also launching a stablecoin sandbox, and officials say they expect to welcome applications from sterling stablecoin issuers before the end of 2026. The key open variables are the final size and duration of any caps, how generous reserve remuneration becomes, and how strictly the UK lines are drawn around self custody.
For issuers and traders, the real edge will come from understanding which GBP stablecoins end up qualifying as systemic, how bank like their backing is, and where non custodial usage remains possible.
Conclusion
The Bank of England is not stepping back from tight oversight of systemic stablecoins, but it is now actively tweaking the toolkit after pushback on caps and reserves. For crypto users, the direction is toward safer, more bank integrated GBP stablecoins, with less room for fully permissionless designs at systemic scale, and the details set over the next year will determine how competitive the UK stablecoin market becomes.
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