The Bank of England’s newly proposed regulatory framework for stablecoins aims to protect financial stability — but industry figures say the rules remain overly restrictive and could push innovation offshore.
The Bank of England (BoE) has released its long-awaited proposed regulatory regime for stablecoins, marking the most detailed step yet toward integrating digital assets into the UK’s financial system. But despite two years of consultations and industry feedback, many crypto stakeholders believe the central bank is still taking an unnecessarily heavy-handed approach.
The consultation paper — published on Nov. 10 — incorporates feedback from 46 stakeholders across banking, payments, academia, and the wider crypto sector. While the BoE softened several of its tougher initial stances, industry representatives argue that the updated framework remains “disproportionately cautious” and risks limiting the competitiveness of the UK’s digital asset ecosystem.
Bank of England’s cautious stance remains clear
Tom Rhodes, Chief Legal Officer at UK stablecoin issuer Agant, acknowledged that the new proposals improve on the 2023 version, adding innovations such as direct BoE liquidity access and the ability for issuers to repo reserves for short-term funding.
However, Rhodes believes the central bank continues to signal excessive concern about stablecoin risk.
He argues that while the updated sentiment is an improvement, the BoE has been “unusually vocal” about the potential dangers of stablecoins — a tone that sharply contrasts jurisdictions such as the EU, UAE, and Singapore, which have moved faster to establish clearer, more flexible frameworks.
One of the most debated elements of the proposal concerns holding limits on what the BoE calls “systemic retail stablecoins” — tokens used widely for everyday payments.
The central bank proposes:
- £20,000 limit per individual
- £10 million limit per business
The limits were higher than in last year’s version but still sparked backlash.
Crypto educator Aleksandra Huk criticized the caps as intrusive, arguing that the BoE has no mandate to restrict how much stablecoin an individual can hold.
However, analysts were quick to clarify that the rules apply only to UK-issued, sterling-denominated stablecoins that reach a scale capable of influencing payment systems — not USDT, USDC, or DeFi tokens.
Why the BoE is moving slowly
According to CryptoUK board member Ian Taylor, the central bank’s caution is predictable — and arguably necessary.
Stablecoins pull deposits away from traditional banks. Those deposits traditionally support loan issuance, and reduced lending capacity can impact the broader economy. From the BoE’s perspective, limits help protect financial stability while the market matures.
“So that’s why they want to baby-step this,” Taylor said.
He also noted that the vast majority of UK stablecoins would not fall under the systemic category and would instead be regulated under the FCA’s lighter regime. As a comparison, Mastercard only became a systemically important payment system in 2021.
Operational enforcement remains unclear
While the proposed caps have drawn the most attention, analysts say enforcement will be the real challenge.
Taylor raised concerns about the lack of detail on how stablecoin limits could be tracked — especially since tokens can be acquired on secondary markets, through peer-to-peer transfers, exchanges, or even as workplace compensation. Determining who holds what, and where, may be nearly impossible without intrusive surveillance.
Industry representatives argue that regulators need to provide issuers with clearer timelines, transparent approval processes, and a defined path to becoming “systemic.” Ambiguity, they warn, risks discouraging new entrants.
UK policymaking still moves slowly
The United Kingdom has been discussing comprehensive crypto regulation since 2017. Eight years later, the BoE is still refining its stablecoin framework.
According to Taylor, the prolonged timeline — worsened by changes in government, inconsistent priorities, and fragmented oversight between Treasury, the FCA, and the BoE — has become a major weakness.
Companies hoping to issue stablecoins in the UK lack a predictable path, causing many to shift operations to more agile jurisdictions.
“We’ve been consulting on this for almost five years and still don’t have an actual licensing framework in place,” Taylor said.
Innovation vs. “money-grade controls”
Despite the concerns, some analysts see progress. Access to BoE liquidity and deposit accounts is considered a significant step forward — one that could enhance trust in regulated stablecoin issuers.
Arvin Abraham, partner at Goodwin Procter, believes the central bank’s approach is fundamentally fair:
“The overriding message is that innovation is welcome, but if you want your token to function like money, you need money-grade controls.”
While the UK may not yet have the streamlined clarity of other markets, the latest proposals signal that the central bank is increasingly open to bringing stablecoins into the core of the country’s financial system — albeit on its own slow and cautious timeline.