A new political push is emerging in Westminster as lawmakers urge the UK Treasury to rethink how the country plans to regulate systemic stablecoins.
A cross-party group from both parliamentary chambers has written to Chancellor Rachel Reeves, arguing that the Bank of England’s proposed rulebook risks isolating the UK from the fast-moving global market for digital settlement assets.
Key Takeaways
UK lawmakers warn the Bank of England’s stablecoin plan could drive innovation and capital abroad.
Proposed caps and reserve rules are viewed as overly restrictive compared to the U.S. and EU.
Industry leaders say the UK risks losing its goal of becoming a top digital-asset hub.
Instead of offering a springboard for the domestic stablecoin industry, the BoE’s current approach could place British firms at a disadvantage, the letter warns. The signatories — which include former ministers, senior party figures and peers from both sides of the aisle — argue that several of the proposed restrictions would effectively freeze stablecoin innovation at the starting line.
Their concerns are not limited to one issue. The letter highlights a cluster of policies that, taken together, would constrain adoption: limits on how much individuals and companies can hold, a ban on wholesale usage outside a tightly controlled sandbox and rules preventing issuers from earning interest on their reserves.
In the lawmakers’ view, these measures would not protect the system — they would merely encourage users to rely on dollar-based stablecoins from abroad.
Industry Sees the Same Problem
UK-registered crypto firms say the political intervention reflects a wider sentiment among builders. Executives argue that stablecoins are already functioning as infrastructure, not experiments, and that the UK is in danger of regulating them as though they were still theoretical.
One senior exchange operator said the country risks “locking itself into a defensive stance while others open the door to real-world adoption.” Another industry voice noted that sterling-backed stablecoins currently make up a negligible portion of global supply — less than a tenth of a percent — and warned that policies built around hypothetical risks rather than market realities could cement that underperformance.
What the Bank of England Has Proposed
The BoE’s framework for systemic sterling stablecoins includes temporary caps of £20,000 per user and roughly £10 million for most businesses. Issuers would also have to keep a large portion of their reserves as non-interest-bearing deposits at the central bank.
Critics argue that this structure makes the economics of launching a competitive stablecoin nearly impossible. If issuers cannot earn interest on their backing assets while global competitors can, sterling-denominated tokens will always be less efficient, less attractive and less scalable.
International Landscape Looks Much More Open
The political frustration grows when compared to other leading jurisdictions.
Across the European Union, MiCA already provides a functioning framework that allows euro stablecoins to operate at scale while imposing guardrails only where monetary sovereignty is concerned. In the United States, the GENIUS Act has introduced a path for widespread use of regulated stablecoins in payments and settlement — without the hard caps London is considering.
For UK firms watching these developments, the message is clear: if Britain sets stringent limits while rivals encourage growth, capital and talent will naturally follow the friendliest environment.
Warning for the Treasury
The lawmakers’ letter argues that the UK’s ambition to become a global hub for digital assets is incompatible with a regime that restricts basic functionality. While the letter stops short of demanding that the BoE scrap its approach, it calls on the Chancellor to intervene before the policy “locks the UK into a fragmented and uncompetitive position.”
As one executive put it: “If pound-backed stablecoins are artificially constrained, activity won’t vanish — it will simply move offshore.”
