UK Central Bank Softens Stablecoin Limits Amid Industry Pressure

The Bank of England is reconsidering its earlier plan to impose strict limits on the amount of stablecoins that businesses can hold.

According to Bloomberg, the central bank now plans to allow exemptions for certain firms, including cryptocurrency exchanges, that need to maintain large stablecoin reserves for settlement and liquidity.

This step is part of a broader strategy to integrate stablecoins into Britain’s financial system without stifling innovation.

However, the move drew criticism from cryptocurrency companies, which argued that such limits could significantly hinder their operations. Crypto-focused firms often rely on substantial stablecoin holdings to maintain liquidity, process transactions efficiently, and facilitate trading on digital platforms.

Simon Jennings, chair of the UK Cryptoasset Business Council, said the proposed framework “simply doesn’t work in practice”. He added that it is especially problematic for companies operating in the digital asset ecosystem.

BOE Governor Signals Softer Tone

BoE Governor Andrew Bailey has long expressed caution about the rise of privately issued stablecoins, warning that they could pose a threat to financial stability and undermine monetary policy.

Nevertheless, Bailey recently appeared to soften his stance. In remarks last week, he noted that well-regulated stablecoins could coexist with traditional finance if proper safeguards are in place.

International Competition Intensifies

The UK’s evolving approach comes amid intensifying global competition in the digital finance sector. For instance, in July, the United States passed the GENIUS Act, taking a decisive step forward. The legislation lays out a clearer regulatory framework for stablecoin issuers.

This progress has put pressure on UK and European regulators to accelerate their own policies—or risk losing financial innovation and investment to overseas markets.

Critics argue that the UK’s cautious pace has made it less attractive for crypto entrepreneurs, even as London seeks to position itself as a global fintech hub. Analysts believe the BoE’s softer stance could help restore confidence and encourage firms to build and issue stablecoins within the UK.

Stablecoin Market Continues Rapid Expansion

The global market for stablecoins has grown to an estimated $314 billion, according to CoinMarketCap. Most of these digital tokens are tied to the US dollar. Among them, Tether (USDT) and Circle’s USD Coin (USDC) are the most widely used.

In contrast, stablecoins pegged to the British pound are extremely rare. Data from DefiLlama shows that less than $1 million worth of these coins is currently in circulation.

This tiny share highlights how far the UK lags in developing a domestic stablecoin ecosystem—a gap that regulators and policymakers are now under pressure to close.

Regulatory Adjustments in Response to Industry Pushback

In response to industry feedback, the BoE is reportedly considering allowing systemic stablecoins to hold part of their reserves in secure assets such as short-term government bonds.

This adjustment would bring UK rules closer in line with those in the US and EU, addressing concerns that overly strict regulation could drive innovation and capital abroad.