BoE Defends Strict Stablecoin Limits to Protect Financial Stability
The Bank of England (BoE) has cautioned that loosening stablecoin regulations in the UK could threaten financial stability and even spark a credit crunch, according to Deputy Governor Sarah Breeden. Speaking to Reuters on Tuesday, Breeden said regulators face “a different set of risks to manage” as the UK moves toward integrating this “new form of money.”
Last week, Breeden expressed confidence that the UK can keep pace with the US on stablecoin oversight, even as crypto industry leaders criticized the BoE’s latest stablecoin consultation paper for being too strict compared to American rules.
BoE’s Holding Limits Aim to “Halve the Stress” on Banks
Among the most controversial measures is a proposal that caps stablecoin holdings at £10,000 ($26,300) for individuals and £10 million ($13.1 million) for most companies. Breeden said the limits would “halve the stress” on banks and credit creation by curbing deposit withdrawals used to purchase stablecoins. She did not specify when the restriction might be lifted.
The debate comes as the global stablecoin market has surged to $312 billion in 2025, with regulators worldwide looking to emulate the US GENIUS Act, signed earlier this year by President Donald Trump, which seeks to balance innovation and consumer protection.
40% Backing Rule Linked to Circle-SVB Fallout
The BoE also proposed requiring stablecoin issuers to hold 40% of their reserves with the central bank—without earning interest. Breeden defended the move, citing Circle’s USDC depeg in March 2023, when $3.3 billion of its reserves were trapped at the collapsed Silicon Valley Bank.
While the Financial Conduct Authority (FCA) will oversee stablecoins used for crypto trading, the BoE plans to regulate those used for daily payments. The UK’s regulatory push follows a September meeting between Chancellor Rachel Reeves and US Treasury Secretary Scott Bessent, where both nations pledged closer coordination on crypto oversight.
Meanwhile, Coinbase and UK stablecoin firm BVNK ended a $2 billion partnership on Tuesday, a deal that could have accelerated stablecoin adoption in the UK.
