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

The Bank of England has admitted that stablecoin regulation is overly conservative and is reassessing the framework. The original plan’s holding limits sparked backlash, prompting the policy to pivot toward a more pragmatic approach while maintaining London’s fintech advantage.

The Bank of England shifts its stance, and stablecoin regulation policy begins 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 told Financial Times that the stablecoin regulatory proposal initially put forward by the central bank “may have been too conservative,” and that it is now reassessing the original framework, with the goal of building a system that balances financial stability and industry development.

This statement has been widely seen by the market as an important signal that the UK government and financial regulators are taking a further pragmatic turn in their attitude toward digital assets. Over the past year, the UK originally intended to impose highly conservative restrictions on “systemic stablecoins,” including requiring issuers to place 40% of reserves with the Bank of England in a non-interest-bearing form, while also setting limits on individuals’ and businesses’ holdings of stablecoins. According to early drafts, the general public’s holding limit was about 20,000 pounds sterling, while corporate holdings would be capped at 10,000,000 pounds sterling.

• Related news: Extremely strict! The Bank of England proposes limits on stablecoin holdings; industry pushes back, saying it violates decentralization principles

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

Industry pressure intensifies, as the UK worries about losing fintech competitiveness

Breeden said that the Bank of England is currently reexamining other alternative options, hoping to avoid an overly restrictive regulatory framework that would constrain the market. She emphasized that the central bank wants to establish a stablecoin system that truly works, while also ensuring the safety of users and the financial system.

The shift in UK regulatory stance is related to the rapid escalation of global stablecoin competition. In the US, efforts are accelerating to advance the CLARITY Bill and the GENIUS Bill to establish comprehensive rules for stablecoins and the digital-asset market. Hong Kong has already completed the Stablecoin Ordinance and is preparing to issue its first batch of stablecoin licenses. Abu Dhabi, Singapore, and Japan also continue to attract large financial institutions to enter the market.

In recent years, the UK government has been hoping to repackage London as a global digital financial center, and the Treasury and the FCA have gradually become more open toward 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, meanwhile, is responsible for regulating “systemic stablecoins” that could 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 choosing the US or Asian markets first, further weakening London’s influence in global fintech competition.

The Bank of England remains concerned about bank deposit outflows and financial risks

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 amounts of bank deposits flowing into stablecoins, further compressing banks’ lending capacity, and even triggering liquidity problems for the financial system.

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

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

The Bank of England has not yet disclosed 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 limits and reserve ratio.

Global stablecoin regulation is gradually shifting toward a competition-based model

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

Especially after the US accelerates stablecoin legislation, major financial centers in Europe and Asia have begun to readjust strategies. Hong Kong, Singapore, Abu Dhabi, Japan, and the UK have recently issued nearly synchronized signals of openness, aiming 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 has been gradually changing. The market will next watch whether the UK will reduce the reserve ratio, remove the holding limits, or allow a more flexible design for stablecoin reserve assets. These adjustments will directly affect whether the UK can preserve its financial center status in the global digital-asset competition.