BOE Plans Exemptions to Stablecoin Cap After Pushback

• BOE plans to grant exemptions on stablecoin limits after strong industry criticism.
• Bailey adopts a softer tone, acknowledging stablecoins’ role in payment innovation.
• UK seeks balance as US and EU advance clearer stablecoin regulatory frameworks.

The Bank of England is ready to ease its proposed restrictions on stablecoin holdings after facing intense criticism from the crypto industry. According to a Bloomberg report, the central bank plans to introduce carve-outs for firms requiring larger reserves of fiat-backed digital assets. This comes as global competition over stablecoin regulation intensifies, particularly with the United States advancing under the GENIUS Act signed in July.

Flexible Stablecoin Framework

The Bank of England (BOE) had initially proposed strict limits, £20,000 for individuals and £10 million for companies, on holdings of widely used stablecoins such as USDT and USDC. Officials argued the caps would reduce systemic risk, maintain monetary control, and protect consumers from excessive exposure to private digital assets. 

However, several crypto native firms said the restrictions could prevent day-to-day operations, especially for exchanges and fintechs managing liquidity and settlements. Citing people familiar with the matter, the report said that exemptions are now being drafted to accommodate such businesses. 

Simon Jennings from the UK Cryptoasset Business Council stated that the proposed limits “simply don’t work in practice.” Industry participants warned that enforcing them could drive activity abroad, particularly to the United States or the European Union, where there is clarity for stablecoin oversight.

Governor Andrew Bailey, once a critic of privately issued stablecoins, has adopted a more balanced view. He had cautioned that stablecoins could threaten financial stability, but now acknowledges their role in payment innovation. Last week, Bailey said it would be “wrong to be against stablecoins as a matter of principle,” suggesting they could coexist alongside traditional bank systems.

UK in Pressure as US and EU Advance Stablecoin Rules

The UK’s softer stance comes amid fears of losing competitiveness in the over $300 billion global stablecoin market, dominated by U.S. dollar pegged assets. While sterling-linked tokens are marginal, with less than $1 million in circulation, other regions have already moved ahead. 

The U.S. GENIUS Act and the EU’s MiCA framework provide clear guidance for issuers, prompting calls for Britain to accelerate its own regulatory clarity. As part of its revised approach, the BOE plans to permit the use of stablecoins as settlement assets within its Digital Securities Sandbox. 

The controlled pilot will allow financial institutions to test blockchain-based issuance and trading under regulatory oversight. By enabling stablecoins to be settlement instruments, the bank aims to observe their performance before establishing comprehensive rules.

The BOE is also considering allowing systemic stablecoins to back part of their reserves with short-term government securities. This could align the UK’s risk management standards with those used in the US and EU, creating more confidence for the market. Analysts believe this alignment could help maintain market stability while encouraging responsible innovation.

Related: US And UK Form Joint Crypto Task Force To Implement Rules

Industry Reactions and Growing Market Momentum

Crypto industry representatives have long argued that rigid restrictions would constrain innovation in one of finance’s most dynamic areas. Coinbase Vice President of International Policy Tom Duff Gordon previously said that “imposing caps on stablecoins is bad for UK savers, bad for the city and bad for sterling.” His comments are similar to broader concerns that stringent limits could divert liquidity away from London.

Reeve Collins, Tether co-founder, also predicted that all fiat currencies could exist in stablecoin form by 2030. Speaking at the Token2049 conference in Singapore, Collins said the transition is inevitable as digital assets simplify cross-border transactions and support tokenized markets. Analysts estimate stablecoins could process more than $50 trillion in payments globally by the end of the decade.

Meanwhile, the BOE’s changing position is a step forward in its ongoing regulatory development. While BOE is cautious about risks on private digital money, its willingness to consider exemptions is a broader effort to balance innovation with financial stability. By allowing flexibility in stablecoin holdings, the UK aims to stay competitive in a growing global payments sector.