UK's Stablecoin Stance Pits Financial Stability Against Innovation Ambitions

The Bank of England (BoE) is signaling a potential shift in its approach to stablecoin regulation, with reports indicating the central bank may grant exemptions to its proposed ownership limits for certain firms, including cryptocurrency exchanges. This move comes amid growing industry pushback against the BoE's initial plans to impose caps on stablecoin holdings, which critics argue would place the UK at a regulatory disadvantage compared to the United States and the European Union. The proposed caps-ranging from £10,000 to £20,000 for individuals and £10 million for businesses-were outlined in a 2023 consultation paper, with implementation expected by year-endBank of England to Exempt Some Firms From Stablecoin Limits^[1].

Industry stakeholders, including Coinbase's Tom Duff Gordon, have criticized the restrictions as detrimental to the UK's financial ecosystem and sterling's global standing. They argue that no other major jurisdiction has imposed similar caps, and the measures could stifle innovation while complicating enforcement. For example, stablecoin issuers lack visibility into token holders, making compliance with the limits logistically challenging and costlyUK Crypto Groups Criticize Bank of England’s Proposed Stablecoin …^[2]. The BoE's rationale for the caps centers on mitigating systemic risks, such as deposit outflows from traditional banks and potential disruptions to financial stability. However, critics contend that the UK's approach contrasts sharply with the U.S. and EU, where regulatory frameworks prioritize market access over restrictive limits. The U.S. GENIUS Act, passed in July 2025, establishes licensing and reserve requirements without imposing ownership caps, while the EU's MiCA framework focuses on reserves and governanceWhat the GENIUS Act Means for UK and Foreign Stablecoin Issuers^[3].

Andrew Bailey, the BoE's governor, has recently adopted a more nuanced stance, acknowledging stablecoins' potential to drive innovation in cross-border payments and financial systems. He emphasized the importance of balancing risk management with the coexistence of banks and nonbank entities in credit provision. This shift aligns with the BoE's Digital Securities Sandbox, which allows firms to use stablecoins as settlement assets, providing the central bank with real-world insights into their applicationsBoE Faces Pushback Over Proposed Stablecoin Ownership Limits^[4]. Analysts suggest the BoE's flexibility could reflect broader concerns about the UK's competitive position in the global stablecoin market, which now exceeds $300 billion in market capitalization, with projections of $3.7 trillion by 2030Stablecoins Break $300B Market Cap With 47% Growth …^[5].

The debate over stablecoin regulation has also highlighted tensions between the BoE and the UK Treasury. While the BoE has framed its proposed caps as transitional measures to manage risks during the transition to digital currencies, the Treasury has pushed for greater blockchain innovation. This divergence underscores the challenges of aligning regulatory caution with the UK's ambitions to lead in fintech. Meanwhile, academic experts warn that delays in finalizing a framework could erode London's competitive edge, particularly as global adoption of stablecoins accelerates.

Looking ahead, the BoE plans to release a consultation on stablecoin regulation later this year, with the potential for further adjustments. Industry advocates argue that a more adaptive approach-focusing on oversight and reserve requirements rather than strict caps-could align the UK with international trends while fostering innovation. As the stablecoin market continues to grow, the BoE's ability to balance risk mitigation with regulatory flexibility will be critical in shaping the UK's role in the evolving digital financial landscapeHow the GENIUS Act Regulates Foreign Issuers—and How It …^[6].