October 10, 2025
By Our Correspondent
Regarding digital assets, the Bank of England (BoE) is shifting its position. The central bank is allegedly considering exemptions to its proposed stablecoin holding caps, a move that could drastically alter the crypto and stablecoin landscape in the UK and indicate a more adaptable and flexible strategy in the face of growing international competition.
The BoE is getting ready to give waivers to a few companies, especially fintech and cryptocurrency exchanges that need bigger stablecoin reserves for settlement and liquidity, according to a recent Bloomberg story. Additionally, the central bank is looking into how stablecoins may be incorporated into its Digital Securities Sandbox, a pilot program that allows for regulated financial testing using blockchain technology.
Because stablecoin legal environments in the US and the EU are already more lenient, industry analysts cautioned that these constraints may drive innovation and liquidity away from London and toward these two regions.
According to a digital assets analyst located in the UK, “too strict regulations would risk stifling innovation in one of the most dynamic areas of fintech.” “London’s competitiveness in the changing global stablecoin ecosystem may be maintained by the BoE’s more balanced approach.”
The BoE’s evolving perspective on stablecoins
Once one of the most outspoken opponents of stablecoins, Governor Andrew Bailey now seems to be changing his mind. In the past, Bailey had warned that stablecoins may “erode trust in money,” arguing that tokenized bank deposits were a safer option.
But his recent remarks point to a more realistic perspective. “We have to recognize that innovation in payments will not stop at the edge of traditional banking — the goal is to manage that innovation safely,” Bailey said, pointing out that stablecoins can coexist alongside traditional finance.
This change must be made at the right time. While the European Union’s MiCA framework is now in place, the United States has previously established explicit restrictions for dollar-backed stablecoins under former President Trump’s GENIUS Act. The UK could lose its standing as a major global hub for fintech if it delays any longer.
The Bank of England is apparently thinking about permitting systemic stablecoins to store reserves in short-term UK government bonds in response to mounting industry pressure.
This would give issuers and investors greater stability and trust by bringing British legislation closer to international norms seen in the US and EU.
“It could be revolutionary to allow stablecoin reserves in short-term government securities,” a strategist with Bloomberg Intelligence stated. “It ensures transparency and oversight while aligning risk management with market practices.”
According to DefiLlama data, there are currently only $581,000 in circulation for sterling-pegged stablecoins, making them a niche market. In contrast, there are currently $468 million in circulation for tokens linked to the euro. However, Bloomberg Intelligence experts predict that by 2030, stablecoins could process more than $50 trillion in payments, highlighting their increasing importance in international banking.
The Bank of England’s changing stance on digital assets indicates that it does not wish to overlook the upcoming stablecoin-powered financial innovation. The BoE’s more accommodating approach may put the UK in a position to rival the US and EU in terms of stablecoin acceptance and fintech leadership, as the rush to regulate and implement blockchain-based payment systems accelerates globally.
Stablecoins are no longer being written off as a fad as the central bank advances toward adoption. Rather, they are becoming more and more regarded as a crucial component of the digital financial infrastructure of the UK.
