Sarah Breeden, deputy governor of the Bank of England, told UK lawmakers that the central bank is open to considering alternative approaches to managing stablecoin risks instead of imposing strict holding limits.
Speaking before the House of Lords Financial Services Regulation Committee on Wednesday, Breeden explained that the proposed limits were originally intended to prevent a large-scale shift of bank deposits into stablecoins. She warned that such a migration could weaken banks’ ability to lend and potentially reduce the availability of credit for businesses and households.
“We are genuinely open to other ways of achieving the objective. I think you’ve heard from other people as part of your inquiry that this risk to the provision of credit is real.”
Sarah Breeden, deputy governor of the Bank of England, emphasized that the proposed stablecoin holding limits were introduced as a way to manage potential risks to the financial system. However, she noted that the central bank is willing to consider other approaches that could achieve the same goal.
“We proposed holding limits as a way of managing that risk. We are open to feedback on other ways of achieving it,” Breeden told lawmakers. She added that, as the authority responsible for financial stability, the central bank must ensure that a sudden shift of deposits from banks does not lead to a sharp decline in credit available to businesses and households in the United Kingdom.
Industry groups have criticized the proposed limits, which were suggested to range between 10,000 and 20,000 British pounds (about $13,368 to $26,733). Critics argue that such restrictions could send a negative signal about the country’s stance on cryptocurrency, potentially pushing businesses to relocate abroad while slowing innovation and economic growth.
Self-custody wallets face stricter stance
In November, the Bank of England published a consultation paper outlining its proposed regulatory framework for sterling-denominated systemic stablecoins and invited public feedback until Feb. 10.
The central bank noted it would continue monitoring the risks linked to unhosted wallets, which provide less oversight over transactions compared with regulated platforms.
Breeden also told lawmakers that stablecoins held in self-custody wallets outside regulated entities — such as cryptocurrency exchanges — would not fall under the UK’s regulatory framework. According to her, these “unhosted wallets” lack a regulated provider responsible for ensuring compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements.
Breeden added that unhosted wallets would not be permitted under the UK’s proposed regime, contrasting this approach with the regulatory framework in the United States, where such wallets are allowed.
Applications for sterling-denominated stablecoins are expected to open before the end of 2026, according to Sarah Breeden, deputy governor of the Bank of England.
Meanwhile, the Financial Conduct Authority — the regulator overseeing the United Kingdom’s financial services sector — has launched a regulatory sandbox that will allow selected companies to test stablecoin products and services starting in the first quarter of 2026.
Although the Bank of England is still consulting on and finalizing its regulatory framework for sterling-backed stablecoins, companies will be able to begin submitting applications to issue them before the end of the year.
Responding to criticism that the UK is lagging behind in crypto regulation, Breeden told lawmakers: “I hear some say that the UK is behind. I simply don’t recognize that. We’ll be welcoming applications from stablecoin issuers by the end of this year.”
“On the substance of our regime, the guiding principle is that a stable coin used as money in the economy should be as robust as the money we use today issued by banks.”
