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Bank of England Eases Stablecoin Rules, Allowing Investment in Government Debt

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The Bank of England (BoE) has proposed a more flexible regulatory framework for stablecoins, allowing issuers to invest up to 60% of their backing assets in government debt, a move that marks a softer stance toward the rapidly growing digital asset sector.

The proposal, part of a package of rules expected to take effect next year, represents a shift from the BoE’s earlier, stricter approach, which required stablecoin issuers to hold all their reserves in non-interest-bearing central bank accounts — a move that critics said would have stifled the industry’s development in the UK.

The new plan reduces that requirement to 40%, allowing the remaining portion to be invested in interest-bearing assets such as short-term government securities.

“Today’s proposals mark a pivotal step towards implementing the UK’s stablecoin regime next year,” said Sarah Breeden, the BoE’s deputy governor for financial stability. “We’ve listened carefully to feedback and amended our proposals for achieving this, including on how stablecoin issuers interact with the Bank of England.”

The central bank confirmed it will supervise only those stablecoins intended for widespread payment use, while non-systemic tokens — those primarily used for crypto trading — will fall under the Financial Conduct Authority (FCA).

However, the BoE maintained its plan to cap holdings at £20,000 ($26,842) for individuals and £10 million for businesses, though large firms such as supermarkets or exchanges could apply for exemptions. The bank said these limits would be temporary, designed to mitigate potential financial stability risks.

In a further step, the BoE is also considering providing liquidity facilities to systemic stablecoin issuers during times of market stress.

Crypto industry figures welcomed the more balanced approach but urged further relaxation. Tom Duff Gordon, vice president of international policy at Coinbase, said the BoE “could have allowed up to 80% of assets to be invested in government bonds” and called for “clearer timelines” on when the caps would be lifted.

The consultation period for the proposals runs until February 10, 2026.

Bank of England to lift stablecoin limits only once risks to financial stability subside

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The Bank of England (BoE) will maintain its proposed limits on stablecoin holdings until it is certain that the digital assets pose no risk to the broader financial system, Deputy Governor Sarah Breeden said on Wednesday.

In a speech, Breeden emphasized that the central bank’s cautious approach stems from concerns that large and sudden outflows of bank deposits into stablecoins could destabilize traditional lending. “Such outflows could lead to a precipitous drop in credit for businesses and households,” she warned, if banks are unable to replace lost deposits quickly through wholesale funding.

The BoE has previously suggested caps of between £10,000 and £20,000 ($12,800–$25,600) for individuals, with higher thresholds for businesses. The final levels will be detailed in a consultation paper next month, which will outline the UK’s future stablecoin regulatory framework.

Breeden said the caps would be lifted “once we see that the transition no longer threatens the provision of finance to the real economy.” Large corporations, however, may be exempt so they can hold higher amounts if necessary.

Under the UK’s proposed framework, the BoE would oversee systemic sterling-backed stablecoins — those expected to play a major role in payments — while the Financial Conduct Authority (FCA) would regulate smaller issuers. The BoE is also working with the Treasury on a resolution regime to ensure continuity of services if a stablecoin issuer fails.

Breeden rejected criticism that the UK is lagging in crypto regulation, noting that Britain aims to finalise its framework next year, aligning its timeline with the United States.