BoE Stablecoin Regulation Reconsidered as Limits and Reserves Face Industry Pushback

The Bank of England (BoE) is reconsidering parts of its proposed stablecoin regulation after industry feedback warned that the framework could hurt the UK’s competitiveness in digital finance. Deputy Governor Sarah Breeden said officials are reviewing earlier proposals, including a temporary holding cap of up to £20,000 per person for a single stablecoin. The BoE is also rethinking reserve requirements—reportedly the idea that at least 40% of stablecoin reserves would sit at the central bank without earning interest, with the remainder invested in short-term UK government debt. For traders, the key change is economics. Reserve structures can create “yield drag” for issuers: more idle, non-interest-bearing reserves can reduce issuer incentives and weaken UK stablecoin supply. Industry participants also argue that holding limits can push activity toward other jurisdictions. Overall, the debate is shifting toward a more workable, liquidity and redemption-focused balance between stability safeguards and innovation. However, final parameters and timelines remain uncertain, keeping near-term policy sentiment volatile for UK-linked stablecoins.