Bank of England Regulates Stablecoins for Financial Stability

TLDR

• BOE sets £20,000 limit for individual stablecoin holders.
• Systemic stablecoins will face stricter reserve requirements.
• Community response varies on regulatory clarity and innovation impact.

The Bank of England (BOE) is taking steps to regulate stablecoins in the United Kingdom. As part of its strategy, the BOE plans to implement holding limits on stablecoins to mitigate risks to financial stability, especially considering the UK’s bank-based mortgage market.

The BOE intends to introduce these limits through a framework that will be fully established by 2025. Deputy Governor for Financial Stability, Sarah Breeden, asserts that the BOE wants their regulatory regime to match the speed and effectiveness of the United States’ regulatory actions.

Proposed Limits and Regulatory Framework

The BOE’s proposed consultation on stablecoin regulation is set to be published on November 10, 2025. The proposed framework includes a holding limit of £20,000 for individual consumers and £10 million for business organizations. This consultation has been confirmed in Breeden’s keynote remarks at the Association of Financial Markets in Europe’s annual operations conference.

A key aspect of the proposed regulations is that it will initially apply only to systemic stablecoins, which are stablecoins widely used for payments. These systemic stablecoins will be subjected to the new regulations, while other stablecoins will remain under the Financial Conduct Authority’s current lighter regime.

Enhancing Stability through Reserve Requirements

The BOE also plans to enforce strict reserve requirements for the issuers of systemic stablecoins. According to Sasha Mills, Executive Director for Payments, Digital and Innovation at the BOE, these issuers may be required to hold a portion of their reserves in central bank deposits. This requirement aims to reduce reliance on commercial banks, thereby enhancing financial stability.

No direct funding or grants are currently associated with this regulatory shift. However, the BOE’s readiness to provide accounts for stablecoin issuers signals a stable institutional support. The discussion and insights shared by Sasha Mills are available in her keynote speech at the Association of Financial Markets in Europe’s Annual Operations.

Impacts on Market and Community Response

The framework is anticipated to affect major stablecoins like USDC, USDT, and PayPal’s PYUSD. There is a moderate increase observed in stablecoin Total Value Locked (TVL) in UK-based DeFi protocols, but no substantial liquidity shifts or staking flows have been reported as of the latest data available on November 7, 2025.

Community response to the announcement has been mixed. On platforms like Twitter, Reddit, and Telegram, some express approval towards regulatory clarity, while others are concerned about potential impacts on adoption due to holding limits. Arthur Hayes, former CEO of BitMEX, commented on potential risks of innovation moving offshore due to stringent rules.

Past Regulatory Events and Insights

The UK’s move draws parallels with past regulatory events like the EU’s MiCA framework and the US’s GENIUS Act. These events have led to increased institutional uptake and market adjustments, with governance tokens and DeFi protocols initially experiencing volatility followed by stabilization. Major stablecoins were among the affected, similar to the expected pattern for the UK.

Key figures in the cryptocurrency space also weighed in. Vitalik Buterin, co-founder of Ethereum, emphasized the necessity of stablecoin regulation while cautioning against stifling innovation. CZ, CEO of Binance, welcomed regulatory clarity but expressed concerns over limits potentially stifling adoption efforts.

The BOE’s official Twitter account has confirmed the dates for the upcoming consultation, reiterating its commitment to ensuring stability and fostering innovation within the digital asset sector.