The Bank of England plans to loosen stablecoin regulations! The Vice President admits: The early proposal was too conservative.

The Bank of England admits that stablecoin regulation is too conservative and is reassessing the framework. The originally proposed holding restrictions sparked backlash, prompting the policy to shift toward a more pragmatic approach to preserve London’s fintech advantage.

The Bank of England shifts stance, and stablecoin regulation policies begin to loosen

The Bank of England has shown a clear change in its regulatory position on stablecoins. Sarah Breeden, Deputy Governor of the Bank of England, recently admitted in an interview with the Financial Times that the central bank’s original stablecoin regulatory proposal “may have been too conservative,” and that it is now reassessing the existing framework. The goal is to build a system that balances financial stability with industry development.

This remark has been seen by the market as an important signal that the UK government and financial regulators are taking an even more pragmatic stance toward digital assets. Over the past year, the UK originally planned to impose highly conservative restrictions on “systemic stablecoins,” including requiring issuers to store 40% of reserves in an interest-free form at the Bank of England, while setting limits on stablecoin holdings for individuals and businesses. Under the early drafts, the general public’s holding limit was about 20,000 GBP, while companies were capped at 10,000,000 GBP.

• Related news: Extremely strict! The BoE proposes limits on stablecoin holding caps; industry pushes back: violates decentralization principles

However, these measures quickly triggered strong backlash from the industry. Multiple fintech companies and crypto firms criticized that the excessively high reserve ratio and holding limits would weaken the UK’s competitiveness as a digital asset hub, and could also force businesses to move to more flexible regulatory environments such as Singapore, Hong Kong, Abu Dhabi, or the United States.

Industry pressure mounts; the UK worries about losing fintech competitiveness

Breeden said the Bank of England is currently reexamining other alternative options, hoping to avoid the regulatory framework placing excessive restrictions on the market. She emphasized that the central bank wants to establish a stablecoin system that truly works, while also ensuring user and financial-system safety.

The shift in the UK’s regulatory stance is related to the rapid escalation of global stablecoin competition. The United States has recently been accelerating efforts to advance the CLARITY Bill and the GENIUS Bill, aiming to establish comprehensive rules for stablecoins and digital-asset markets. Hong Kong has already completed the Stablecoin Ordinance and is preparing to issue the first batch of stablecoin licenses. Abu Dhabi, Singapore, and Japan are also continuing to attract major financial institutions to enter the market.

In recent years, the UK government has been hoping to rebrand London as a global digital financial center, and the Treasury and the FCA have gradually become more open to the crypto industry. This year, the UK Financial Conduct Authority (FCA) has launched a stablecoin regulatory sandbox, and several GBP stablecoin issuers have already entered the testing stage. The Bank of England is responsible for regulating “systemic stablecoins” that may affect financial stability.

The market generally believes that if the UK maintains overly strict restrictions, major payment companies and stablecoin issuers are likely to prioritize the United States or Asian markets first, further weakening London’s influence in global fintech competition.

The Bank of England still worries about bank deposit outflows and financial risk

Although the regulatory direction has started to loosen, the Bank of England’s core concerns about stablecoins have not disappeared. Breeden has repeatedly warned that if stablecoins rapidly become popular in the payments market, it could lead to large-scale bank deposits flowing into stablecoins, further compressing banks’ lending capacity and even triggering liquidity problems in the financial system.

The UK’s financial system is highly dependent on bank lending, unlike the financial architecture dominated by U.S. capital markets. The Bank of England believes that once stablecoins become everyday payment tools, bank deposits may experience a large-scale “migration effect,” so it hopes to reduce potential run risk through reserve and holding restrictions.

Bank of England Governor Andrew Bailey has also previously stated publicly that if global stablecoins lack internationally coordinated rules, they will put pressure on financial stability. He believes that the rapid expansion of dollar stablecoins may change the structure of cross-border payments and global capital flows, so regulation cannot be driven by a single country alone.

The Bank of England has not yet published the final version of the rules, but market expectations are that later this year, the UK will officially open applications for systemic stablecoin licenses and adjust the original holding restrictions and reserve ratio.

Global stablecoin regulation is gradually moving toward a competition model

The UK policy shift also reflects a global trend in stablecoin regulation that is gradually moving from risk prevention to balancing market competition and financial innovation. On the one hand, central banks and regulators worry that stablecoins will impact banking systems and monetary policy; on the other hand, they also worry about missing opportunities for digital financial development in their own markets.

Especially after the U.S. accelerates stablecoin legislation, major financial centers in Europe and Asia have begun to readjust their strategies. Hong Kong, Singapore, Abu Dhabi, Japan, and the UK have recently released near-simultaneous signals of openness, hoping to attract more payment companies, trading platforms, and financial institutions to build stablecoin infrastructure locally.

Breeden’s latest remarks also show that the Bank of England’s internal attitude toward stablecoins is gradually changing. The market will next watch whether the UK will lower the reserve ratio, remove holding limits, or allow a more flexible design for stablecoin reserve assets. These adjustments will directly affect whether the UK can maintain its status as a financial center in the global digital-asset competition.