Bank of England Reconsiders Stablecoin Rules: £20,000 Limit May Be Scrapped

Amid ongoing industry criticism, the Bank of England (BoE) is signaling its readiness to revise its proposed framework for pound-denominated stablecoins. BoE Deputy Governor Sarah Breeden, while appearing before the House of Lords Financial Services Regulation Committee, stated that the central bank is openly reconsidering holding limits, reserve requirements, and the overall approach to managing deposit run risks. **The BoE's Initial Proposal and Its Shortcomings**

The initial framework contained two provisions that sparked immediate and sustained opposition. Individual holding limits were set at £20,000, and corporate holding limits at £10 million, intended to prevent pound-denominated stablecoins from becoming too large, thereby triggering rapid capital flight from traditional bank deposits during times of stress. This concern is legitimate. A widely adopted pound stablecoin, if offering competitive yields or superior utility, could draw deposit balances on a massive scale, reducing funds available to banks and creating systemic vulnerabilities in the event of a run. But the industry response was that these limits are commercially unviable and technically difficult to enforce. The £20,000 individual cap makes pound stablecoins unusable for any meaningful commercial payments, cross-border transfers, or treasury management functions. This would restrict the product to a retail utility token with no institutional applications, eliminating the primary revenue opportunities that justify the cost of compliance for issuers. The £10 million corporate cap poses similar limitations for corporate use cases. Issuers argue that these restrictions would structurally disadvantage UK-issued pound stablecoins relative to EU and US counterparts operating under less restrictive frameworks, pushing the market offshore rather than onshore.

**The Meaning of True Openness** The language used in Breeden’s testimony suggests genuine flexibility rather than cosmetic consultation. The BoE’s stated openness to alternative ways of managing financial stability risks without strict holding caps marks a departure from the central bank’s typically defensive posture when the industry objects to proposed rules. The revisions will explore whether alternative mechanisms can achieve the same deposit run protections without stifling commerce, potentially including transaction speed limits, real-time monitoring requirements, or circuit breaker mechanisms during periods of stress. Breeden’s criticism of the industry is noteworthy. She expressed disappointment in the lack of constructive engagement from companies, noting that while many have criticized the existing caps, few have offered concrete alternative technical solutions. The BoE is inviting the industry to co-design solutions rather than simply accepting or rejecting the initial proposal. This invitation comes with a deadline. A revised draft of the rules is expected by June 2026.