For years, the Bank of England (BoE) took a cautious stance on stablecoins. Crypto firms complained that the BoE’s rules were too strict and discouraging innovation in the UK. Now, that tone is changing fast.
The UK Treasury is giving the BoE a new legal duty to support innovation in payments and digital money. Its main job will still be keeping the financial system stable, but it will also be expected to help new financial technologies grow.
The BoE will have to report on this goal every year, putting pressure on it to keep up with new technology.
City minister Lucy Rigby said the goal is to balance both sides: keep the financial system safe while helping the UK remain a global leader in finance as technologies like blockchain and tokenization change how assets such as gold and bonds are traded.
- The BoE must now support innovation. A new law will make supporting innovation in payments and digital money part of the BoE’s official responsibilities.
- No limit on how much stablecoin one person can own. The BoE had planned to limit individual holdings because it feared stablecoins may become a risk to financial stability. That limit has been removed. Instead, there will be a £40 billion cap on the total amount of stablecoins that can be issued. This gives companies and users more freedom to use stablecoins.
- Stablecoin reserve rules have been adjusted. Issuers must still fully back their tokens with real assets, but the BoE has reduced the share required to be held in non-interest-bearing central bank accounts. This allows a larger portion of reserves to be placed in interest-bearing assets, offering more flexibility in reserve management.
These changes fix two major problems for stablecoin companies: strict limits on how people use stablecoins and low profits for issuers.
The £40 billion limit still puts a ceiling on the market, but it applies to the total amount of stablecoins issued rather than how much each person can own. That makes everyday use easier.
Allowing issuers to earn interest on their reserves also makes the business more profitable and brings UK rules closer to those in other countries.
But there is still a bigger problem: most stablecoins today are linked to the US dollar, such as USDT and USDC. Sterling stablecoins have struggled because there isn’t much demand for a pound-based token when so much crypto trading already uses dollars.
So, the new rules make sterling stablecoins easier and more profitable to launch, but they don’t guarantee that people will want to use them.
(adsbygoogle = window.adsbygoogle || []).push({});The UK is trying to catch up with the US and EU on crypto regulation. The EU introduced its main crypto rules, called MiCA, in 2024, giving crypto companies clearer rules. In the US, the Trump administration has encouraged banks and financial firms to use blockchain and crypto, while new stablecoin laws have also moved forward quickly.
The UK had been slower and stricter, so these new changes look like an attempt to close the gap.
But it is too early to know if they will be enough. It will depend on how quickly the new law is approved, what the final stablecoin rules look like, and whether crypto companies actually want to set up in the UK.
At the moment, the ongoing development confirms the UK wants to be part of the digital finance industry, not shut it out.
