UK Crypto Executives Push Back on Bank of England’s Proposed Stablecoin Framework

Why This Rule Change Is a Big Deal

The Bank of England (BoE) published a consultation paper laying out proposals to regulate so-called “systemic stablecoins.” These are stablecoins whose scale and use could pose broader risks to the financial system.

Under the proposals:

• Stablecoin issuers deemed “systemic” would be allowed to back up to 60% of their reserves with short-term UK government debt.

• The remaining 40% would need to be held in unremunerated (zero-interest) deposit accounts at the Bank of England.

• For issuers recognized as systemic at launch, or those transitioning from non-systemic status, the BoE suggests a temporary allowance of up to 95% in government debt to help issuers scale.

• The BoE is also considering liquidity support mechanisms to act as a backstop for systemic issuers in times of stress.

• To prevent consumer concentration risk, the draft imposes temporary holding limits of £20,000 per coin for individuals and £10 million for businesses. 

The BoE’s goal: modernize payments infrastructure while managing stability risks. 

Industry Pushback Is Loud and Clear

While some regulatory analysts praise the BoE for scaling back its previous 2023 proposal, which required 100% of backing to sit with the central bank, crypto leaders are not convinced. This was seen in F.N. London's report.

Key criticisms include

• Holding caps: The proposed limits (£20k / £10M) are seen as restrictive and not aligned with global standards.

• Innovation risk: Heavy rules, they argue, may discourage issuers from building stablecoins in the UK, undermining London’s role as a global fintech hub. 

• Unclear systemic criteria: Some firms say it’s not clear what will count as a “systemic issuer,” introducing uncertainty over future compliance. 

Kraken UK’s general manager warned that the proposal “risks stranding use cases for pound-denominated stablecoins,” while legal arms of firms like Revolut called the limits “out of step” with other global jurisdictions.

BoE’s Rationale: Innovation + Prudence

From the BoE’s perspective, the proposals reflect careful listening and balanced policymaking. Deputy Governor Sarah Breeden emphasized that the changes were made following extensive industry feedback. 

The BoE’s consultation is explicitly designed to be future-proof. The institution envisions stablecoins becoming part of the UK payments infrastructure, but only if issued with robust risk controls. 

To that end, Skadden reported that the BoE is proposing a statutory trust arrangement for backing assets. Issuers must segregate their reserves, reconcile them regularly, and use regulated custodians. Skadden

Importantly, the BoE does not plan to allow stablecoin issuers to pay interest (i.e., yields) to holders, reinforcing the idea that these coins are primarily payment instruments, not investment products. 

Fintech, Money, and Global Competition

This consultation isn’t just about stablecoins; it’s about how the UK positions itself in the evolving digital-money landscape.

• The BoE regime would only apply once issuers are designated “systemic” by HM Treasury. Other stablecoins (non-systemic) would remain regulated by the FCA.

• These proposals align with broader fintech modernization efforts in the UK, a bet that digital forms of money could become a staple of mainstream payments.

• At the same time, the BoE’s stabilizing rules (statutory trust + reserve segregation) aim to prevent failures that could threaten financial stability.

If adopted, this framework could influence other major financial centers, signaling that stablecoins may not just live in the crypto world but in central-bank-regulated payment systems.

• Final rules could land in 2026: The consultation is open until 10 February 2026, after which the BoE and FCA will draft detailed Codes of Practice. 

• Systemic designations are key: Which stablecoin issuers are deemed “systemic” will be a major battleground; this determines who faces the stricter rules.

• Backstop liquidity matters: If the BoE provides a liquidity facility, systemic issuers may be more resilient in stress scenarios, a big win for trust.

• Global issuers will watch closely: Issuers outside the UK may weigh entering the UK market or decide to keep operations where regulation is lighter or more flexible.