Bank of England Softens ‘Overly Conservative’ Stablecoin Plans Amid Industry Pressure

In brief

• The Bank of England is reportedly reconsidering parts of its stablecoin plan.
• A 40% reserve floor could cost issuers £11.2 million per £1 billion in circulation.
• Observers say the bank’s shift could point to a move toward a more workable regime.

The Bank of England is reconsidering key parts of its proposed stablecoin rules, softening its push after industry pushback over planned limits on holdings and reserve requirements.

Sarah Breeden, the Bank of England’s deputy governor for financial stability, told the Financial Times on Thursday that officials were weighing other approaches to containing stablecoin-related risks as the sector grows.

“It was based on experience of potential liquidity stress,” Breeden said. “But we will look hard to see if we have been overly conservative in our thinking there.”

Breeden noted the reserve proposal was based on liquidity stress seen during bank runs of late, including the deposit withdrawals from Silicon Valley Bank in 2023. She also acknowledged that the industry would prefer to hold more interest-earning assets.

The central bank is “looking very hard at whether there are different ways we can manage what we think is an important risk as stablecoins come into play,” Breeden said.

The remarks came a day after Sasha Mills, the Bank’s executive director for financial market infrastructure, said at the Financial Times Digital Asset Summit that the bank is treating stablecoins as “a new form of money” and expects to accept applications from would-be systemic stablecoin issuers by year-end.

Over the same week, BoE Governor Andrew Bailey warned of a coming clash with the U.S. over stablecoin standards, arguing that weaker redemption rules for dollar tokens could push stress into the UK during a crisis.

Stablecoins are crypto tokens designed to track the value of fiat currencies such as the dollar or pound, often by holding reserves in cash, government debt, or similar assets. In the UK, oversight has been split: the FCA is expected to supervise non-systemic issuers, while the Bank of England would regulate stablecoins widely used for payments.