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Bank of England Deputy Warns Against Over-Relaxing Stablecoin Rules

By  |  November 11, 2025

Bank of England Deputy Governor Sarah Breeden cautioned on Tuesday that easing regulatory standards for stablecoins could threaten Britain’s financial stability and potentially trigger a credit crunch. Speaking to Reuters, Breeden emphasized that the United Kingdom faced a distinct set of risks compared to the United States and therefore required its own tailored approach.

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    According to Reuters, the Bank of England on Monday unveiled new regulations governing systemic stablecoins — digital currencies designed to maintain a fixed value — that are used for payments. While the new framework marked a partial relaxation from earlier proposals, many in the crypto industry argued the measures remained too restrictive and could limit stablecoin adoption in the UK.

    Under the new rules, individual holdings of stablecoins would be capped at £20,000 (about $26,840), while companies could hold up to £10 million. Issuers must also keep 40% of their reserve assets with the Bank of England, without earning interest on those deposits.

    In her interview with Reuters, Breeden said the 40% requirement was “grounded” in past market stress episodes, referencing the 2023 collapse of Silicon Valley Bank and the temporary de-pegging of the USDC stablecoin issued by Circle. “Look at what happened with SVB, with Circle – those numbers are broadly in line with that. That’s why we’re proposing 40% rather than a smaller number,” she said.

    Breeden defended the temporary caps, noting they would help “halve the stress” on banks and credit creation that might result if depositors shifted large sums into digital coins. Per Reuters, she pointed out that Britain’s financial system relies far more heavily on bank lending than America’s, with roughly 85% of mortgages and consumer loans financed through banks.

    “We have a different set of risks to manage as we transition to bringing in this new form of money,” Breeden said, according to Reuters.

    Related: CSBS Urges Treasury to Preserve State Authority in Implementing the GENIUS Act

    The central bank’s latest proposals represent a moderation from its 2023 plan, which would have required issuers to hold 100% of backing assets as unremunerated deposits at the Bank of England — a move the industry had warned would stifle innovation. Even so, the sector has signaled that it will continue pressing for further easing of backing and holding requirements.

    Under the proposed framework, the Bank of England will regulate only systemic stablecoins intended for everyday payments, while the Financial Conduct Authority will oversee non-systemic tokens primarily used for crypto trading.

    The global stablecoin market remains dominated by dollar-based issuers such as Tether, which relocated its headquarters to El Salvador earlier this year, and Circle, based in the United States. Nearly all tokens are currently used for cryptocurrency trading rather than payments, and sterling-backed coins still make up a negligible share of the market.

    As regulators worldwide seek to establish safeguards for this emerging financial technology, Breeden noted there is “more work to do” to ensure consumers understand the relative safety of different coins. According to Reuters, she stressed that people in the UK need to know “which are safe and which are not.”

    Source: Reuters