The UK Just Dropped Its Stablecoin Rulebook—And That 40% Cash Requirement Could Reshape The Crypto Market

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The Bank of England unveiled comprehensive regulations on Nov. 11 that could make the U.K. a global hub for digital assets—or drive major stablecoin issuers straight to America’s more lenient shores.

The proposals introduce strict reserve requirements for “systemic” stablecoins, with issuers forced to park 40% of their backing in non-interest-bearing accounts at the BoE and another 60% in U.K. government bonds. For investors watching the stablecoin space, these rules represent a fundamental shift in how digital currencies will operate in one of the world’s major financial centers.

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The Race Against Washington Is On

BoE Deputy Governor Sarah Breeden made the stakes clear: the U.K. is racing to implement its stablecoin and tokenisation framework "as swiftly as the U.S." to stay competitive in the rapidly evolving digital asset landscape.

Speaking at DC Fintech Week last month, Breeden said the central bank is "working hard to put in place a regulatory regime for stablecoins being widely used for payments ahead of their emergence," so that the U.K.'s monetary framework is "fit for the future."

"We want to enable responsible innovation in finance in this period of profound technological change," she said, adding that tokenisation and distributed ledger technology could "transform real-world retail and wholesale financial services" by making markets "faster, cheaper, and more efficient."

Breeden pushed back on claims that the U.K. is behind the U.S. in its regulatory rollout: "I must say I don't recognise this. The [Financial Conduct Authority] has already consulted on its detailed requirements for stablecoins, and we will consult later this year on our own. That will put us in a position to finalise our regime next year — as is the aim in the U.S."

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"The UK's approach," she added, "is about ensuring innovation doesn't simply compete by taking higher financial or operational risks. We want stablecoins that can safely sit alongside commercial bank and central bank money — forming part of a more diverse, competitive, and resilient payments ecosystem."

The coordination structure splits oversight across multiple agencies: His Majesty’s Treasury designates which stablecoins are “systemic” based on size and market influence, while the FCA supervises non-systemic tokens and consumer protection. Stablecoins not pegged to sterling—like USDT and USDC—remain under evaluation.

Those Holding Caps Could Limit Market Growth

The proposals don’t stop at reserve requirements. The BoE wants to cap how much individuals and businesses can hold in systemic stablecoins: £20,000 ($26,159.00) for individuals and £10 million for businesses, according to Bloomberg.

The rationale focuses on redemption risk and liquidity management, but these limits could fundamentally constrain how stablecoins function in the real economy. For businesses using stablecoins for international payments or treasury management, a £10 million cap might prove impractically small.

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Industry leaders including Circle (NASDAQ:CRCL) and Tether are preparing to enter the U.K. market, but the non-interest-bearing reserve requirement has raised eyebrows. Critics like Fireblocks’ Varun Paul said the 40% requirement could put U.K. issuers at a competitive disadvantage compared to their U.S. peers who face no such restrictions.

The Flexibility That Could Save The Framework

The BoE built in some pragmatism. New issuers can initially allocate up to 95% of reserves in government securities, gradually reducing to the required 60% as operations expand. It’s a recognition that strict rules from day one could strangle innovation before it starts.

Still, the central bank acknowledged concerns about whether the U.K. bond market can absorb the increased demand from stablecoin reserves. Plans are underway to improve access to central bank liquidity to address this challenge.

The proposals are open for public consultation until Feb. 10 with finalized regulations expected by the end of 2026. The BoE maintains that restrictions deemed unsustainable by some industry members are temporary measures that will be relaxed as systemic risks decrease.

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This article The UK Just Dropped Its Stablecoin Rulebook—And That 40% Cash Requirement Could Reshape The Crypto Market originally appeared on Benzinga.com