Bank of England Eases Stablecoin Restrictions

The central bank’s final policy also adjusts the composition of backing assets. Issuers may now hold 70% of their reserves in short-term government debt, an increase from the previously proposed 60%. The remaining 30% must be maintained in non-interest-bearing central bank deposits. Deputy Governor for Financial Stability Sarah Breeden described the framework as a milestone for UK payments, emphasizing that prompt redemption and robust safeguards are intended to build public trust in these new financial instruments.

While proponents argue that stablecoins offer faster, cheaper cross-border settlements, the Bank of England remains wary of potential systemic risks. Officials have cautioned that a widespread shift toward these assets could drain deposits from traditional commercial banks, potentially inflating the cost of credit and complicating the broader lending landscape.