The Bank of England has blinked. Its final stablecoin framework, published on Monday, drops the holding caps it once treated as central to protecting the banking system.
The retreat is real, and the reason is competition. Industry warned that the original rules would smother the sterling stablecoin market before it formed. The Bank has listened.
What changed
The headline reversal concerns ownership limits. The November consultation proposed caps of £20,000 per person and £10 million per business for sterling stablecoins. Both are gone.
In their place sits one issuer-level control. Each stablecoin faces a cap on total issuance, set at first at £40 billion. The Bank is now policing the size of the float, not what any individual can hold.
A softer line on reserves
The second change eases the economics for issuers. The Bank will let up to 70% of backing assets sit in short-term government debt, up from 60%.
The rest must stay as non-interest-bearing deposits at the central bank. That unremunerated portion drew the loudest complaints, because it earns nothing and weighs on any workable business model. Lifting the yield-bearing share to 70% loosens that grip.
Why the Bank gave ground
The stated mission has not changed. The Bank still wants to guard against rapid outflows of deposits from banks into digital money. The method is what shifted.
The pressure that moved it was competitive, not theoretical. Sterling tokens make up less than 0.5% of a global stablecoin market worth about $315 billion, a market dollar products dominate. A regime too harsh to use would not make sterling safer. It would make sterling absent.
The Dublin problem
The sharpest argument was about geography. A GBP stablecoin can be issued from outside the UK. Hold the line on strict caps and the most-used sterling token might launch from Dublin, beyond the Bank's reach.
That made the choice stark. The Bank could regulate a functioning domestic market or watch the activity migrate and regulate nothing. It chose the first.
What comes next
This is a policy statement with draft rules, not the finished article. The Bank aims to finalise the Codes of Practice by the end of 2026, with further material in 2027.
Deputy governor Sarah Breeden had conceded the first plans were overly conservative. Monday's framework turns that admission into policy.
The safeguards remain. What the Bank has accepted is that a rulebook nobody can build a business under protects no one.
