BoE's Breeden says 'genuinely open' to alternatives after industry called £20,000 stablecoin cap cumbersome. Also reviewing 40% reserve rule.
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Bank of England Deputy Governor Sarah Breeden signalled the central bank is prepared to retreat from its proposed £20,000 individual ownership limit for sterling-based stablecoins, acknowledging industry criticism that the cap was operationally cumbersome. The remarks, reported by the Financial Times, mark a significant de-escalation for UK digital-asset regulation and open the door to a more lenient framework before any final rules come into effect.
Breeden, who oversees financial stability at the BoE, told the FT that the central bank is “looking very hard at whether there are different ways we can manage what we think is an important risk as stablecoins come into play.” The climbdown follows a wave of industry pushback after the BoE’s initial discussion paper proposed hard limits on stablecoin holdings, alongside a requirement that at least 40% of reserves sit on deposit at the central bank earning no interest.
The original plan would have capped individual holdings of sterling-backed stablecoins at £20,000 per coin, with businesses limited to £10 million. The BoE argued these limits would protect high-street banks from a sudden migration of deposits into digital tokens pegged 1:1 to the pound. Crypto firms and stablecoin issuers pushed back immediately, calling the per-coin cap unworkable for payments, trading collateral, and corporate treasury use.
Industry groups told the BoE that the £20,000 limit would make sterling stablecoins operationally “cumbersome,” according to the FT report. Breeden’s new comments confirm the central bank has absorbed that feedback. “We are genuinely open to thinking whether there are other ways of achieving our objective,” she said.
That flexibility transforms the policy risk outlook. A strict ownership ceiling would have rendered a UK-based stablecoin effectively unusable as a unit of account for any commercial or institutional purpose. Breeden’s signal reduces the probability of a final rule that kills the domestic stablecoin sector outright.
A separate rule that would force sterling stablecoin issuers to keep at least 40% of reserve assets in a non-interest-bearing account at the Bank of England is also being reconsidered. The remaining 60% would be held in sovereign bonds and other liquid instruments. The Financial Times noted the requirement is considerably stricter than comparable rules in the United States, making UK stablecoins less profitable to operate and less attractive to launch.
Breeden said the 40% figure came from studying the pace of withdrawals during the 2023 Silicon Valley Bank collapse and other recent stress events. “It was based on experience of potential liquidity stress,” she told the FT. “We will look hard to see if we have been overly conservative in our thinking there.”
The possibility of a lower threshold directly improves the economics for issuers. Every percentage point moved from non-interest-bearing central bank deposits into yielding assets boosts the net interest margin. In a higher-rate environment, that margin is material. The BoE’s willingness to reconsider the 40% level signals that the final framework may land closer to a commercially sustainable middle ground.
A reduction in the reserve requirement would sharpen the UK’s competitive edge against the European Union, where the Markets in Crypto-Assets (MiCA) regulation imposes its own reserve and custody rules. Several major stablecoin issuers have been evaluating multiple jurisdictions. The BoE’s softened stance makes a sterling product launch more likely within the next two years.
Breeden emphasised the central bank’s pro-innovation intention. “We are keen to create a regime where stablecoins can succeed and can deliver benefits to the users,” she said. “It is money, and we want to make sure that this new form of money is safe.” That framing, from a deputy governor responsible for financial stability, represents a notable shift from the caution-first tone of earlier BoE statements.
The urgency of the rethink becomes clear when looking at current market shares. Sterling-based stablecoins account for less than 0.5% of a global stablecoin market worth more than $320 billion, according to the FT report. US dollar-pegged tokens dominate the space, leaving the UK’s digital-asset ambitions marginalised.
| Metric | Sterling Stablecoins | Global Stablecoin Market |
|---|---|---|
| Market Share | <0.5% | 100% |
| Implied Total Value | ~$1.6 billion | >$320 billion |
| Dominant Currency | GBP | USD (over 99% of non-GBP market) |
That tiny slice means the UK has almost no pricing or liquidity influence. To build a credible sterling-based on-chain payments and settlement system, the rules must permit scale. The BoE’s original proposals threatened to lock the UK out entirely, while rival hubs advanced their frameworks. By signalling flexibility now, the central bank reduces the risk that stablecoin development shifts offshore to more accommodating jurisdictions.
Crypto firms have a track record of relocating to friendlier jurisdictions. The UK’s earlier hard limits risked accelerating that trend just as the EU’s MiCA regulation begins to harmonise token rules across 27 countries. The BoE’s retreat therefore has a second-order benefit: it keeps sterling-based stablecoin projects anchored, preserving the UK’s seat in the next phase of digital finance.
In the same FT interview, Breeden addressed separate monetary policy questions that interact with the stablecoin framework. Markets are pricing two or three UK interest rate cuts in 2026, with the first possible as early as summer. Breeden pushed back on that timeline.
“We’ve got time to understand firstly the size of the shocks and secondly, how the economy is evolving,” she said. “You’re obviously correct that we can’t wait forever. We don’t need to do it in June or July.”
That delay in the cutting cycle keeps sterling money-market yields elevated for longer. Higher short-term rates improve the revenue a stablecoin issuer can earn from investing reserve assets in, for example, UK government bills or repo. The more generous the reserve structure, the more of that carry can be passed to holders or retained as issuer profit. The BoE’s cautious rate posture therefore amplifies the commercial case for a sterling stablecoin, provided the 40% reserve requirement is relaxed.
Breeden downplayed the risk that the Middle East conflict would generate a sustained wage-price spiral like the 2022 energy shock. She cited a softer labour market and restrictive monetary policy as buffers. For crypto markets, that reduced the tail risk of a sudden policy tightening that could tighten dollar liquidity globally and pressure risk assets.
The BoE is currently unwinding a £525 billion bond portfolio accumulated during quantitative easing. The central bank estimated last year that this quantitative tightening adds between 0.15 and 0.25 percentage points to long-term interest rates. Breeden described that effect as “not enormous.”
A steeper yield curve from ongoing balance-sheet reduction increases the carry available on longer-dated sovereign bonds held in stablecoin reserves. That gives another small positive to the profitability profile of sterling stablecoins. The BoE’s assessment that the effect is modest suggests the pace of QT will not be accelerated to a degree that materially alters funding conditions.
The market reaction to Breeden’s comments has been muted because sterling stablecoins remain a niche product. The real signal is that a major central bank is willing to adapt its rulebook in response to industry evidence. That precedent matters for other jurisdictions writing stablecoin legislation, particularly as the U.S. debates its own stablecoin bill.
A published consultation paper that removes the £20,000 individual cap, cuts the 40% reserve floor to something closer to 20–25%, and provides a clear authorisation timeline would be read as a strong pro-growth signal. That would likely trigger at least one major stablecoin issuer to commit to a sterling product, creating a positive feedback loop of liquidity and usage.
A reversion to hard limits, or the introduction of new restrictions such as mandatory redemption fees or concentration limits, would undo the goodwill Breeden’s comments have generated. The market would interpret that as confirmation that the UK intends to remain a rule-taker in digital assets.
Practical rule: The BoE’s retreat removes a near-term obstacle. Formal rule changes are the timeline to watch; until they arrive, the sterling stablecoin sector remains in a window of opportunity.
When a stability-focused deputy governor says she wants stablecoins to succeed, it legitimises the asset class for institutional allocators. The BoE’s pragmatic pivot coincides with a U.S. legislative debate where bank opposition to a stablecoin bill has been vocal. The contrast strengthens the narrative that some regulators are becoming more accommodative, a dynamic that could boost sentiment across the broader crypto market analysis. For assets such as Bitcoin and Ethereum, clearer regulatory frameworks have historically coincided with periods of institutional adoption.
For now, the BoE’s move reduces the left-tail regulatory risk that had been weighing on UK digital-asset ambitions. Stablecoins worth less than 0.5% of the global market carry little immediate weight. If Breeden’s softer line translates into a workable rulebook, however, the sterling stablecoin sector could move from an afterthought to a viable niche within a $320 billion market. The next concrete step is a formal consultation paper; once that lands, traders will be able to size the true shift in the UK’s stance.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.