The Bank of England has reversed course on stablecoin regulation. Sarah Breeden, the BoE's Deputy Governor for Financial Stability, told the Financial Times on May 14 that the central bank's own proposals had been “excessively conservative.” GBP-denominated stablecoins currently account for less than 0.5% of a global market worth $315 billion, according to CoinGecko data. That gap is the whole story.
The reversal had been building for months. Since autumn 2025, the fintech and crypto industry had pushed back against two specific proposals: a £20,000 per-person holding cap on each stablecoin, and a requirement to deposit 40% of reserves directly at the central bank with no interest earned. Coinbase CEO Brian Armstrong wrote to British users asking them to sign a parliamentary petition. More than 85,000 people did. The BoE is now, in Breeden’s own words, “genuinely open” to alternative solutions.
The Two Economic Pressure Points
Functionally, the November 2025 consultation paper drew its logic from a real event: the collapse of Silicon Valley Bank in 2023. If a stablecoin run occurred, British banks could lose deposits too quickly. The concern was defensible. The economic implications, for any issuer with serious ambitions, were not.
The first friction point was the holding cap. £20,000 per person and £10 million per company. No other major jurisdiction has proposed anything comparable. For a business using stablecoins for B2B payments with European suppliers, £10 million is an operational ceiling, not a prudential guardrail. It effectively rules out most serious corporate use cases.
The second pressure point was the reserve structure. The proposal required 40% of funds deposited at the central bank with no yield, and 60% in short-dated UK gilts. Circle, which issues USDC, holds roughly 88% of its reserves in T-bills and repo agreements, earning yield on nearly all of it. With gilt rates around 4%, the 40:60 structure would cost a British issuer approximately £11.2 million per year for every billion in circulation, according to analysis by Andres Monty, CEO of Range, a stablecoin risk analytics platform, as reported by Decrypt in May 2026. Scaling to £5 billion in issuance, the cost disadvantage versus a US competitor operating under the GENIUS Act approaches £56 million a year. That is not a manageable number.
Sources: Bank of England consultation Nov 2025 · Range CEO analysis, Decrypt, May 2026
Non-Remunerated Reserve Requirements for Stablecoin Issuers (%)
* BoE revised figure is an estimate based on Range CEO analysis (May 2026). GENIUS Act (US) imposes no non-remunerated reserve floor. Figures are indicative.
* BoE revised figure is an estimate based on Range CEO analysis (May 2026). GENIUS Act (US) imposes no non-remunerated reserve floor. Figures are indicative.
Are GBP Stablecoins Legal in the UK?
Yes, but no definitive regulatory regime exists yet. The framework governing systemic GBP stablecoins is still under construction. New draft rules are expected in June 2026, followed by further consultations through the year. A final framework will likely arrive in 2027.
The Financial Conduct Authority has already moved. The FCA selected four companies to test stablecoin issuance inside its regulatory sandbox: Revolut, Monee Financial Technologies, ReStabilise, and VVTX. Tests launched in Q1 2026 cover retail payments, wholesale settlement, and crypto trading. Results will feed into final rules expected in the second half of the year.
“We are focused on creating a regime in which stablecoins can succeed and bring benefits to users. But this is money, and we want to be sure that this new form of money is safe.” — Sarah Breeden, Deputy Governor for Financial Stability
The restrictive component had always been the BoE's prudential requirements. With the revision announced this week, the space reopens. Coinbase's Head of Policy for Europe, Katie Haries, said in a statement: “A cap on stablecoins is a cap on innovation, with real and significant risks to UK competitiveness.” For context on how the parallel European framework is developing, see our analysis on the MiCA regulation and the race among European banks to build the first MiCA-compliant euro stablecoins.
London or Dublin: The Competitive Risk
Andres Monty put the question plainly to Decrypt: “The BoE should ask itself whether it wants to regulate the most-used GBP stablecoin, or watch it get issued from Dublin.” Ireland is an EU member state, MiCA is already in force, and its reserve requirements are less onerous than those proposed by the British central bank. An issuer wanting a sterling-pegged stablecoin but unable to absorb the UK's reserve costs already has an alternative route today. That route closes only if London offers competitive terms.
The GBP market starts from a significant disadvantage. Euro stablecoins, themselves marginal against the dollar giants, had already reached $777 million in monthly volume by March 2026, according to TRM Labs data. The sterling market is smaller still. For scale: even euro stablecoins represent less than 0.25% of the global total. The entire non-dollar on-chain currency category remains wide open. Whoever builds the right rules now captures the market. Whoever builds rules that cost £11.2 million per year per billion in circulation cedes ground to those who don't.
The Bank of England's new draft rules are expected in June 2026. The FCA sandbox closes in the second half of the year. The final framework will likely land in 2027. What remains striking is the pace: the American GENIUS Act has been law since July 2025. The global stablecoin market is worth $315 billion. The GBP share sits below 0.5%, though breeden picked up the phone. The June document will show whether the numbers add up.
