Bank of England Signals Willingness to Revise Stablecoin Holding Caps After Industry Backlash
The Bank of England signaled on March 11, 2026, that it is prepared to reconsider its proposed caps on stablecoin holdings after sustained criticism from the crypto industry, stablecoin issuers, and a coalition of UK lawmakers. Deputy Governor for Financial Stability Sarah Breeden , the central bank's most senior official responsible for financial stability oversight, told members of the House of Lords Financial Services Regulation Committee that the BoE is "genuinely open" to revising its approach, provided the industry offers workable alternatives to address the risk of sudden deposit flight from banks [1][2]. What the November 2025 Consultation Proposed The controversy stems from a consultation paper the Bank of England published in November 2025 , setting out proposed rules for "systemic" sterling denominated stablecoins. The consultation, which closed on February 10, 2026 , contained three provisions that drew particularly sharp industry opposition [3][4]. The first was a temporary cap on individual stablecoin holdings in the range of £10,000 to £20,000 , with a separate cap of £10 million for businesses . The limits were designed to mirror proposed digital pound restrictions and prevent a rapid migration of deposits from commercial banks into stablecoins. The second was a 60:40 asset backing requirement : systemic stablecoin issuers would be required to hold 60% of reserves in short term sterling denominated UK government debt (gilts) and 40% as unremunerated deposits at the Bank of England, meaning those reserves would earn no interest. The third was a prohibition on coin holders receiving interest on their stablecoin balances [3][4]. | Proposal | Requirement | Industry Concern | | | | | | Individual holding cap | £10,000 to £20,000 | Restricts retail adoption and usability | | Business holding cap | £10 million | Insufficient for commercial operations | | Reserve backing split | 60% gilts, 40% BoE deposits (unremunerated) | 40% earns zero return, undermining issuer viability | | Interest prohibition | No yield paid to coin holders | Reduces competitiveness against other jurisdictions | Breeden's March 11 Remarks Breeden's public statements came during both a press briefing on the BoE's financial stability report and her subsequent appearance before the Lords committee. She characterized the risk of customers shifting deposits from banks into stablecoins as a "very real risk" but acknowledged that the proposed holding caps were not the only way to manage it [1][2]. "What we have been disappointed with is nobody saying 'why do it this way?' Instead what we had is 'don't do this.'" [1] That remark captured the central bank's frustration: Breeden argued that while the BoE received extensive objections during the consultation period, respondents largely failed to propose concrete alternative mechanisms. She confirmed that the bank would review whether the 60:40 reserve split is "overly conservative" and noted that the structure is "broadly aligned with measures proposed in the United States and already adopted in the European Union" under the Markets in Crypto Assets (MiCA) framework [1][2]. Breeden said the BoE would publish draft rules for a fresh public consultation in June 2026 and aims to finalize regulations by the end of 2026 to align with global standards [1]. Industry Pushback on Multiple Fronts The backlash has come from stablecoin issuers, crypto trade groups, and sitting lawmakers. Benoit Marzouk , CEO of Tokenised GBP , one of the few pound pegged stablecoins currently in circulation, warned there is a "really small" window to get the policy right [2]. "It could be really damaging for the UK if we had this limit for both retail and companies. As a business, you can't do anything with £10 million." [2] Tom Rhodes , chief legal officer at Agant , a firm planning to issue a pound denominated stablecoin, told reporters that tracking who holds tokens in order to enforce the cap would represent "a massive administrative burden" for issuers [2]. Beyond the private sector, a coalition of UK lawmakers from the House of Lords, House of Commons, and the peerage wrote directly to Chancellor Rachel Reeves arguing that the proposed cap could prevent the UK from capitalizing on digital asset opportunities, drive innovation offshore, and push investors toward USD pegged alternatives. The letter warned the policies could position the UK "as a global outlier" [2]. UK crypto industry groups described the cap proposal as a "step in the wrong direction" and urged the Bank of England to abandon the restriction entirely [2]. The Singleness of Money Doctrine Underpinning the BoE's caution is a philosophical commitment it calls the "singleness of money" principle. A 2023 Bank of England discussion paper established the doctrine: for systemic payment stablecoins to operate alongside commercial bank money, they must provide equivalent protection against loss of value and loss of confidence. Stablecoins must remain fully interchangeable with other forms of money at par, meaning no loss of value on redemption [4]. The concern is that if stablecoins trade at different values or if public confidence in them diverges from confidence in bank deposits, it threatens the unified monetary system. Regulatory Architecture Under Construction The Financial Services and Markets Act (FSMA) 2023 expanded the Bank of England's regulatory remit to cover digital settlement assets, including systemic stablecoins, and extended the Financial Conduct Authority's authority to stablecoin issuers and custodians. Under the emerging dual structure, systemic stablecoins, those widely used in payments and posing financial stability risks, will be jointly regulated by the BoE for prudential resilience and the FCA for conduct and consumer protection, after formal recognition by HM Treasury [3][4]. | Regulatory Milestone | Date | Status | | | | | | FSMA 2023 enacted | July 2023 | Complete | | BoE discussion paper on systemic stable…