Bank of England is preparing to water down planned restrictions on stablecoins after pressure from the digital assets industry, with deputy governor Sarah Breeden saying that the central bank’s initial proposals may have been “overly conservative” and that it is now reviewing alternative ways to manage risks posed by the sector.

Breeden told the Financial Times the Bank is “looking very hard at whether there are different ways we can manage what we think is an important risk as stablecoins come into play”. She said the regulator wants to create a regime in which stablecoins can succeed and deliver benefits for users while remaining safe as a form of money.

Stablecoins are digital tokens pegged one-to-one with fiat currencies such as the US dollar. Sterling-based tokens account for less than 0.5 per cent of a global market worth about $315 billion, where dollar-backed products dominate trading and settlement activity.

The Bank of England has previously proposed temporary ownership limits, restricting individuals to holdings of up to £20,000 per stablecoin and businesses up to £10 million aimed at limiting the risk of rapid deposit outflows from commercial banks into digital assets.

It has also consulted on requiring at least 40 per cent of reserves backing UK stablecoins to be held at the central bank in non-interest-bearing accounts, with the remainder invested in sovereign bonds and liquid assets, a structure more restrictive than US frameworks and criticised by industry participants.

Industry figures have welcomed the review. George Morris, digital assets partner at Simmons & Simmons, told The Banker that US dollar stablecoins such as Tether and USDC already dominate liquidity and warned that without more competitive rules “this will not change”.

Mark Fairless, group chief executive of ClearBank, said the decision to revisit the approach created an opportunity for a more proportionate framework balancing financial stability with innovation, adding that stablecoins could improve payment efficiency and support new financial services.

The Bank of England’s consultation on sterling-denominated systemic stablecoins, first issued in November, sets out proposals covering issuance, custody and the use of stablecoins in payments and settlement, with implementation intended to operate alongside frameworks developed by the Financial Conduct Authority and HM Treasury.

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