The Bank of England (BoE) is changing its tune on digital assets. In a move that could reshape the UK’s crypto and stablecoin landscape, the central bank is reportedly planning exemptions to its proposed stablecoin holding caps, signaling a more flexible and adaptive approach amid rising global competition.

A Softer Stance on UK Stablecoin Regulation

According to a recent Bloomberg report, the BoE is preparing to grant waivers to select firms, particularly crypto exchanges and fintech companies that require larger stablecoin reserves for liquidity and settlement purposes. The central bank is also exploring ways to integrate stablecoins into its Digital Securities Sandbox, a pilot program that enables blockchain-based financial testing within a regulated environment.

This marks a notable shift in tone from the Bank of England. Previously, both the BoE and the Financial Conduct Authority (FCA) had proposed strict limits, £20,000 for individuals and £10 million for businesses, on holdings of so-called “systemic” stablecoins used for payments.

Industry experts warned that these restrictions could push innovation and liquidity away from London, directing growth toward the United States or the European Union, where stablecoin regulatory frameworks are already more accommodating.

“Overly tight restrictions would risk stifling innovation in one of the most dynamic areas of fintech,” said one UK-based digital assets analyst. “The BoE’s more balanced stance could help retain London’s competitiveness in the evolving global stablecoin ecosystem.”

BoE’s Changing View on Stablecoins

Governor Andrew Bailey, who was once among the most vocal skeptics of stablecoins, now appears to be reconsidering his position. Bailey had previously cautioned that stablecoins could “erode trust in money,” advocating instead for tokenized bank deposits as safer alternatives.

However, his recent comments suggest a more pragmatic view. Bailey noted that stablecoins can coexist with traditional finance, saying, “We have to recognize that innovation in payments will not stop at the edge of traditional banking — the goal is to manage that innovation safely.”

The timing of this shift is critical. The United States, under former President Trump’s GENIUS Act, has already introduced clear regulations for dollar-backed stablecoins, while the European Union’s MiCA framework is now operational. If the UK delays further, it risks losing its position as a leading global fintech hub.

Aligning With Global Peers on Stablecoin Oversight

Responding to growing industry pressure, the Bank of England is reportedly considering allowing systemic stablecoins to hold reserves in short-term UK government bonds. This would bring British regulations closer to global standards observed in the US and EU, offering issuers and investors more confidence and stability.

“Allowing stablecoin reserves in short-term government securities could be a game changer,” said a Bloomberg Intelligence strategist. “It aligns risk management with market practices while ensuring transparency and oversight.”

Currently, sterling-pegged stablecoins remain a niche market with only $581,000 in circulation, compared to $468 million in euro-linked tokens, according to data from DefiLlama. Yet, analysts at Bloomberg Intelligence project that stablecoins could facilitate over $50 trillion in payments by 2030, underscoring their growing significance in global finance.

UK’s Path Toward Stablecoin Adoption and Digital Asset Innovation

The Bank of England’s evolving digital assets policy suggests that it does not want to miss the next wave of financial innovation powered by stablecoins. With the global race to regulate and adopt blockchain-based payment systems accelerating, the BoE’s more flexible stance could position the UK to compete with the US and EU in stablecoin adoption and fintech leadership.

As the central bank moves toward implementation, stablecoins are no longer being dismissed as a passing trend. Instead, they are increasingly seen as an integral part of the UK’s future digital financial infrastructure.

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