Bank of England Warms to Stablecoins, Wants Better Input

Bank of England stablecoin regulation is moving — slowly, but noticeably. Speaking before the House of Lords Financial Services Regulation Committee this week, BOE Deputy Governor Sarah Breeden signaled that the central bank is willing to revisit key parts of its proposed framework, including the contentious holding caps that drew heavy criticism when the consultation dropped back in November 2025. The catch? Breeden says the industry hasn't actually told the bank how to fix it. That tension — between a regulator reaching for compromise and an industry that keeps saying 'no' without offering a 'yes' — is the real story here.

What Are the Bank of England Stablecoin Holding Limits?

The caps that sparked a fight

The Bank of England stablecoin regulation consultation published on November 10, 2025 proposed holding limits of £20,000 for individual users and £10 million for businesses that accept stablecoins as a payment method. The intention was straightforward — prevent a mass migration of deposits away from commercial banks, which the BOE feared could destabilize the broader financial system if stablecoins scaled rapidly without guardrails.

Industry participants weren't impressed. Tom Rhodes, chief legal officer at UK stablecoin issuer Agant, told reporters at the time that the bank's approach was 'disproportionately cautious and restrictive.' The fear was concrete: caps that tight would functionally kill institutional use cases before the market even had a chance to develop. A £20,000 ceiling doesn't leave much room for serious payment infrastructure — that's roughly the cost of a used car, not the kind of limit you build financial rails on.

Now, the BOE appears to be softening. Breeden told MPs the bank is 'open to feedback on other ways of achieving' the same risk management goal. That's a notable shift from a regulator that, until recently, seemed pretty dug in on the numbers.

We proposed holding limits as a way of managing that risk. We are open to feedback on other ways of achieving it.

Does the Industry Actually Engage With Regulators?

Here's where things get a little uncomfortable for both sides. Breeden's critique of the industry was pointed: firms have been vocal about what they don't want, but nobody has handed the BOE a workable alternative. 'I don't think we've yet had constructive engagement on a different way to solve the problem that I might have hoped for,' she said. 'Instead, what we've had is don't do this, and I understand why you want to do something, as opposed to filling the gap.' Call it a Catch-22 — or call it a regulator frustrated that no one will do the heavy lifting.

Rhodes pushed back on that framing. He told reporters on Thursday that the industry has 'reviewed thousands of pages of consultations from the FCA and the Bank, attended numerous roundtable meetings, and submitted hundreds of pages of input both ourselves and as part of trade associations.' The friction, he argued, is structural — regulators and industry are essentially trying to draft rules for a market that doesn't fully exist yet. You can't submit a comprehensive alternative framework for something that hasn't been built.

Nick Jones, founder and CEO of UK digital assets platform Zumo, offered a more diplomatic read. Industry groups, he said, 'have been working hard, and to tight deadlines, to make tangible recommendations.' His suggestion: the BOE should borrow from the Financial Conduct Authority's so-called Spring model — time-boxed, practical workshops that focus on real use cases rather than abstract high-level back-and-forth. The FCA has used this approach effectively; there's no obvious reason the BOE couldn't do the same.

What Did Sarah Breeden Actually Say About Stablecoins?

A deputy governor's evolving position

Sarah Breeden opened her remarks before the Lords committee with a clear statement of intent: 'We do want to see tokenized money issued by non-banks.' That's a meaningful line from someone who represents the institution that controls sterling. In a September 2025 keynote, Breeden had sketched out her vision of a payments landscape 'characterised by choice across different forms of money and payment — with technology driving faster, cheaper, and more innovative payments for the benefit of business, households, and users of financial markets — and critically, with the whole system underpinned by trust in money itself.'

Rhodes read this as genuine progress. 'Stablecoins being part of a competitive multi-moneyverse represents a substantial and positive evolution in the Bank's thinking,' he said — though he was careful to note it stands in 'sharp contrast' to statements from BOE Governor Andrew Bailey, who has explicitly said he doesn't view stablecoins as a substitute for commercial bank money. Two senior figures at the same institution, pointing in different directions. That internal tension is worth watching.

Jones framed the shift more broadly: 'Over time, we've seen the Bank of England's scepticism towards digital assets start to dissipate.' He called it 'encouraging' that the central bank is now more receptive to competing forms of money and believes pound-sterling-backed stablecoins can exist alongside fiat. The distinction between use cases matters here — large institutional players tend to prefer tokenized deposits, Jones noted, while retail payment companies are better served by stablecoin network effects. Different instruments for different needs.

Reserve Rules and the SVB Shadow

Beyond the stablecoin holding limits, industry groups are pushing hard on two other fronts: capital requirements and reserve composition. Under the current proposal, issuers must hold 40% of reserve assets in unremunerated Bank of England deposits, with the remaining up to 60% in high-quality, short-term UK government debt. No yield on that BOE slice — which adds meaningful drag to any issuer's business model.

The 40% floor was calibrated against historical stress events — specifically the 2023 Silicon Valley Bank collapse that briefly knocked USDC off its $1 peg. Breeden told Reuters, 'Those numbers are broadly in line with that. That's why we're proposing 40% rather than a smaller number.' The logic is defensible. The execution, according to the industry, is too blunt.

The industry's counter-argument: the rules are punitive for fully-backed issuers and should be replaced with oversight focused on reserve quality and transparency rather than arbitrary ratios. Jones put it plainly — if the BOE wants to maintain commercial viability, it should 'consider remunerating a portion of the 40% held at the Bank of England.' He also took direct aim at the bank-like capital requirements, calling them 'inappropriate for fully-backed issuers' that should be replaced by standards focused on reserve quality.

Rhodes summed up the stakes without hedging: 'The UK can be one of the leaders in stablecoins, but only if regulation is proportionate and competitive.' The final policy position from the BOE is still pending. Until it lands, the holding caps, the capital rules, and the reserve ratios are all technically still on the table — and the industry will keep pushing. Whether that pressure produces a workable framework or just more months of frustrated testimony before parliamentary committees is the question nobody can answer yet.