Bank of England: May Lift Stablecoin Limits, Open Applications by the End of 2026

The Bank of England (BoE) Deputy Governor Sarah Breeden testified before the UK House of Lords Financial Services Committee on Wednesday, stating that in addition to setting holding limits, the BoE is open to other approaches for managing stablecoin risks and emphasized that they are “genuinely willing” to consider alternative feedback. Breeden also announced that companies will be able to apply for issuing GBP stablecoins by the end of 2026, countering claims that the UK is “lagging behind.”

Industry Criticism Focus: Limit Design Hinders Innovation and Market Competitiveness

The Bank of England released a consultation document in November 2025 on the regulatory framework for GBP-denominated systemic stablecoins, proposing a holding limit of £10,000 to £20,000, with feedback due by February 10, 2026. Industry groups strongly oppose this, with core criticisms including:

Signaling Anti-Crypto Stance: The limit design is interpreted as the UK not welcoming the cryptocurrency industry.

Driving Business Outflows: Concerns that companies will relocate to jurisdictions with more favorable regulation.

Stifling Innovation: Small holding limits will make it difficult for stablecoins to be widely adopted in retail payments and commercial scenarios.

Hindering Economic Growth: Excessive caution in restrictions damages the UK’s competitive position in the global crypto finance sector.

BoE’s Three Major Policy Positions

Position 1: Flexible Holding Limits

Breeden explained that the purpose of the holding limit is to prevent large-scale deposit transfers from banks to stablecoins, which could impact banks’ lending capacity and credit supply. She said, “We propose setting a holding limit to control this risk and are open to feedback on alternative methods. But as a financial stability regulator, you would expect us to ensure that UK credit does not experience a sharp decline.”

Position 2: Non-Custodial Wallets Not Allowed in the UK

Breeden clearly stated that holding stablecoins in non-custodial wallets outside regulated entities like exchanges will not be protected under UK regulation. She explained that non-custodial wallets lack regulated entities capable of ensuring AML and KYC compliance, so such practices are “not permitted” in the UK, contrasting with US regulations that allow non-custodial wallets.

Position 3: UK Not Behind, Applications Open by End of Year

Breeden rebutted claims that UK regulation is lagging: “I completely disagree with that statement. We will begin accepting applications from stablecoin issuers by the end of this year.” She also reaffirmed the regulatory principle: “Stablecoins used as currency in the economy should be as robust as the bank-issued currency we use today.”

UK Stablecoin Regulation Timeline and FCA Sandbox Progress

The UK Financial Conduct Authority (FCA) has established a regulatory sandbox for multiple companies to test stablecoin products and services in Q1 2026, providing a protected environment before the formal regulatory framework is implemented. The Bank of England is still finalizing consultations on GBP stablecoin rules, but companies can submit issuance applications by the end of 2026.

Frequently Asked Questions

Why is the Bank of England considering removing the stablecoin holding cap?

Industry widely criticizes the proposed £10,000 to £20,000 limit as harmful to innovation and pushing companies out of the UK. Deputy Governor Breeden expressed willingness to consider alternatives but emphasized that any alternative must effectively prevent large-scale deposit transfers from banks to stablecoins to protect UK credit supply.

What is the UK’s regulatory stance on non-custodial stablecoin wallets?

According to Breeden, holding stablecoins in non-custodial wallets outside regulated entities like exchanges is currently “not permitted” in the UK because of the lack of regulated bodies ensuring AML and KYC compliance. This stance contrasts with the US, where non-custodial wallets are permitted.

When will stablecoin issuance applications open in the UK?

Breeden stated that companies will be able to start submitting applications for GBP stablecoins by the end of 2026, with the FCA establishing a regulatory sandbox in Q1 2026 for early testing of related products and services.