The Bank of England Is Rewriting Its Stablecoin Rules After Industry Pushback – The £20,000 Cap May Not Survive

The Bank of England has signaled it is prepared to revise its proposed sterling stablecoin framework following sustained industry criticism, with Deputy Governor Sarah Breeden telling the House of Lords Financial Services Regulation Committee that the central bank is openly reconsidering holding limits, reserve requirements, and the overall approach to managing deposit flight risk.

What the BoE Originally Proposed and Why It Failed

The original framework contained two provisions that drew immediate and sustained opposition. Individual holding limits of £20,000 and business limits of £10 million were designed to prevent sterling stablecoins from growing large enough to trigger rapid capital movement out of traditional bank deposits during periods of stress. The concern is legitimate. A widely adopted sterling stablecoin that pays competitive yield or offers superior utility could attract deposit balances at scale, reducing the funding available to banks and creating systemic vulnerability during a run scenario.

The industry’s response was that the limits were commercially unviable and technically difficult to enforce. A £20,000 individual cap makes sterling stablecoins unusable for any meaningful business payment, cross-border transfer, or treasury management function. It would restrict the product to a retail utility token with no institutional application, eliminating the primary revenue opportunity that would justify the compliance costs of issuance. The £10 million business cap creates similar constraints for corporate use cases. Issuers argued the limits would make UK-issued sterling stablecoins structurally inferior to EU and U.S. equivalents operating under less restrictive frameworks, driving the market offshore rather than domestically.

According to report by Bloomberg, the reserve asset requirement added a second commercial obstacle. Requiring systemic stablecoin issuers to hold 40% of backing assets as unremunerated deposits at the Bank of England imposes a significant cost that EU and U.S. competitors do not face. MiCA’s reserve requirements and the U.S. GENIUS Act framework both allow more flexible backing asset compositions. Breeden acknowledged the 60:40 split may be overly conservative relative to international standards.

What Genuinely Open Actually Means

Breeden’s testimony used language that signals real flexibility rather than performative consultation. Describing the BoE as genuinely open to other ways of managing financial stability risks without rigid holding limits is a meaningful departure from the defensive posture central banks typically adopt when industry pushes back on proposed rules. The revision will explore whether alternative mechanisms, potentially including transaction velocity limits, real-time monitoring requirements, or circuit breakers during stress periods, can achieve the same deposit flight protection without the commercial constraints of hard holding caps.

The criticism Breeden directed at industry is worth noting. She expressed disappointment at the lack of constructive engagement from firms, observing that while many criticized the existing caps, few proposed specific technical alternatives. The BoE is inviting the industry to co-design the solution rather than simply accepting or rejecting the original proposal. That invitation has a deadline. The revised draft rules publish in June 2026.

The Timeline and What It Means for UK Crypto

The regulatory pathway is now defined. Revised draft rules arrive in June 2026. The complete framework including Codes of Practice for systemic stablecoins finalizes by end of 2026. The FCA authorization gateway for crypto firms opens September 30, 2026. UK-based stablecoin issuers have a clear sequence of regulatory events to plan around.

The context this week makes the BoE revision particularly relevant. The stablecoin market hitting $312 billion globally, Wells Fargo filing the WFUSD trademark, the CLARITY Act yield compromise emerging in the U.S. Senate, and the ECB publishing the Appia tokenization roadmap are all part of the same institutional infrastructure buildout. The UK revising its framework to remain competitive with EU MiCA standards and U.S. GENIUS Act provisions is the British regulatory response to the same global dynamic. A framework that drives sterling stablecoin issuance to Dublin or New York serves neither the BoE’s financial stability objectives nor the UK’s ambition to remain a global financial center.

The June draft will reveal whether the BoE found a viable alternative to the £20,000 cap or whether the holding limit survives in modified form. Either way the direction of travel is toward a more commercially viable framework than the one that drew industry opposition.

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