Bank of England relaxes rules for sterling-backed stablecoins

Under the finalized framework, issuers are permitted to hold up to 70% of their reserve assets in short-term government debt, a notable increase from the 60% limit floated in previous consultations. The remaining 30% must be maintained in non-interest-bearing deposits directly with the central bank. This recalibration follows sustained pushback from digital asset firms and legal experts, who argued that proposed individual ownership caps were technically unenforceable and would stifle market growth.

Sarah Breeden, Deputy Governor for Financial Stability, framed the updated rules as a milestone for UK payment choice. By shifting the focus from individual wallet limits to an aggregate issuance threshold, regulators aim to mitigate risks of deposit flight from commercial banks without strangling the nascent sector. The policy aligns with the broader UK strategy to integrate tokenized deposits and digital money alongside traditional financial infrastructure as the country advances its digital securities sandbox and related tokenization initiatives.