• The Bank of England will regulate stablecoins to match US rules and protect financial stability.
• New limits will cap individual stablecoin holdings at 20,000 pounds and business holdings at 10 million pounds.
• The UK will coordinate with US regulators to align digital asset rules and reduce market risks.

The Bank of England (BoE) is making the much-anticipated regulations on stablecoins. The framework will be in accordance with the U.S. regulatory trends. Deputy Governor Sarah Breeden emphasized that the UK will implement its regime as quickly as the U.S. The BoE will publish its formal consultation on November 10. Initial rules will target “systemic” stablecoins, which play a significant role in payments. Smaller stablecoins will remain under the Financial Conduct Authority (FCA) with lighter rules.

The dual regulation model aims at achieving a balance between innovation and financial stability. Officials cite the UK’s bank-dependent mortgage market as a key reason for stricter limits. The proposed caps will restrict individual holdings to £20,000 ($26,000) and business holdings to £10 million. The regulators are trying to ensure that the rapid switch of deposits by traditional banks to stablecoins is avoided.

Coordination with U.S. Regulators

The BoE is liaising with the U.S. authorities such as the Federal Reserve and Treasury in order to bring synchronization on rules. Stablecoins in both countries will follow consistent standards to avoid regulatory arbitrage. The UK’s approach may limit future flexibility for sterling-denominated stablecoins. 

Officials view alignment as essential to maintaining competitiveness in digital asset regulation. A recent joint task force will further strengthen cooperation between the U.S. and UK on digital assets. This Transatlantic Task Force for Markets of the Future will issue its first policy report by March 2026.

Government and Market Initiatives

The UK government plans to appoint a “digital markets champion” to advance blockchain modernization in wholesale finance. This role will coordinate private sector efforts on tokenizing financial instruments. The government also announced the Dematerialisation Market Action Taskforce to replace paper-based share certificates with digital records. They are among the Wholesale Financial Markets Digital Strategy, which involves the issue of blockchain-based sovereign debt, so-called digital gilts, under the DIGIT framework.

In the meantime, FCA has removed a four-year ban on exchange-traded notes (ETNs) on crypto. This decision allows broader access to these products beyond professional investors. HM Revenue and Customs (HMRC) increased its scrutiny of the crypto sector by sending 65,000 letters to potential defaulters in tax. This is an increment of 134% over the last year. The government strives to enhance compliance and responsible crypto innovation.

Industry Response and Implications

The crypto community has criticized the proposed individual and business holding limits. Critics argue similar restrictions do not exist in other financial hubs. Analysts note the collaboration with U.S. regulators could accelerate adoption of digital assets in the UK. 

Experts see potential benefits for market efficiency and innovation if coordination is successful. Observers also highlight that timely implementation of these rules is crucial to maintain the UK’s competitiveness. The BoE’s consultation on systemic stablecoins will set the stage for future regulations.