Bank of England Softens Stablecoin Rules, But Industry Warns the UK Could Still Fall Behind

The Bank of England has eased several of its proposed restrictions on stablecoins, abandoning plans to cap individual holdings and relaxing reserve requirements for issuers. The move marks a significant shift from earlier proposals that drew criticism from crypto firms, fintech companies, and payment providers.

According to reporting from Reuters and the Financial Times, the revised framework removes limits on how much stablecoin individuals can hold while allowing issuers to keep a larger portion of reserves in short-term government debt. However, regulators have retained a £40 billion issuance cap for individual systemic sterling-backed stablecoins, arguing that safeguards are still needed to protect financial stability.

For many in the industry, the changes are a welcome step forward. The debate now centers on whether the remaining restrictions could limit the UK's ability to compete in one of the fastest-growing areas of digital finance.

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Stablecoins Are Becoming a Payments Story

For years, stablecoins were primarily viewed as tools for crypto trading. That narrative is rapidly changing.

Today, stablecoins are increasingly being used for cross-border payments, treasury management, merchant settlement, payroll, and international transfers. Global stablecoin supply now exceeds $300 billion, while companies including Visa, Stripe, PayPal, Coinbase, Circle, and a growing number of banks are investing heavily in blockchain-based payment infrastructure.

Shantnoo Saxsena, CEO and Founder of Encryptus, believes regulators are still viewing stablecoins through the wrong lens.

"The Bank of England's decision to remove individual ownership caps and lower reserve requirements is a welcome step forward," said Saxsena.

The concern, he argues, is that policymakers continue to focus primarily on the impact stablecoins could have on domestic bank deposits rather than their growing role in international payments.

"The framework assumes stablecoins primarily compete with domestic bank deposits, when much of the demand is driven by cross-border payments."

That distinction matters. The global remittance market remains burdened by high fees, multiple intermediaries, and settlement delays that can stretch across several business days.

Stablecoins offer a different model. Transactions settle nearly instantly, operate around the clock, and can significantly reduce costs for users moving money internationally.

According to Saxsena, the UK alone sends billions of pounds abroad every year through traditional remittance channels.

"Migrant workers in the UK send more than £9bn abroad each year, often losing 6-8% of every transfer to correspondent banking fees and delays."

The £40 Billion Question

While the Bank of England removed ownership limits, it maintained a £40 billion issuance cap for individual systemic sterling-backed stablecoins.

The central bank views the measure as a prudent safeguard while the market develops. Critics see it differently.

"A £40bn cap on sterling stablecoins may sound generous, but it effectively keeps the infrastructure at pilot scale while dollar stablecoins issued elsewhere are already supporting real remittance flows."

The concern is that stablecoin adoption is accelerating globally while the UK is placing restrictions on how large its domestic market can become.

Supporters of the cap argue that financial stability should come first. Opponents counter that reserve quality, redemption rights, licensing standards, and consumer protections are more effective safeguards than limiting growth itself.

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A Different Regulatory Approach

Encryptus operates across nearly 100 countries and issues USDA through Anzens, its U.S.-licensed stablecoin platform.

That experience has given the company direct exposure to how different jurisdictions are approaching stablecoin regulation.

According to Saxsena, the U.S. framework focuses more heavily on operational safeguards than growth restrictions.

"We operate under US state licensing through Anzens, where regulators focus on reserve quality, redemption rights and consumer protections rather than imposing artificial limits on growth."

The difference in approach could ultimately influence where companies choose to invest, hire, and build infrastructure.

What This Means for MoonPay and Other Infrastructure Players

The implications extend far beyond stablecoin issuers. A growing number of fintech and crypto companies are building businesses around stablecoin-powered payments, remittances, treasury operations, and global settlement.

Companies such as MoonPay, Transak, Stripe, Circle, Coinbase, and exchanges including OKX are all investing heavily in infrastructure designed to move money through blockchain networks rather than traditional banking rails.

For firms like MoonPay and Transak, stablecoins are increasingly becoming a core part of their long-term strategy.

MoonPay has expanded well beyond crypto onramps, recently strengthening its stablecoin infrastructure and business payments offerings while building tools for enterprises operating with digital dollars.

Meanwhile, exchanges such as Coinbase and OKX increasingly view stablecoins as foundational infrastructure rather than simply trading pairs. Stablecoins now power lending markets, merchant payments, treasury management, remittances, and onchain settlement networks.

The concern is straightforward: if sterling stablecoins face hard growth limits while dollar-backed stablecoins continue scaling globally, companies may choose to build around dollar ecosystems instead.

For infrastructure providers, scale matters. The larger the stablecoin network, the greater the liquidity, utility, and economic opportunity built around it.

The Race to Build Global Payment Rails

The debate ultimately extends beyond the UK. The United States continues advancing stablecoin legislation. The European Union has implemented MiCA. Financial hubs across Asia and the Middle East are actively competing to attract stablecoin businesses and payment infrastructure providers.

As jurisdictions race to become leaders in digital finance, regulatory frameworks increasingly influence where innovation happens.

That is why Saxsena believes the UK's decision could carry broader consequences.

"The UK now stands alone among major jurisdictions in capping stablecoin issuance in its own currency."

Whether the £40 billion limit proves to be a sensible safeguard or a competitive disadvantage remains to be seen.

What is clear is that stablecoins are no longer simply a crypto story. They are becoming global payment infrastructure. And as Saxsena notes:

"That distinction will matter when payment networks and infrastructure providers decide where to invest and build."

The countries that strike the right balance between innovation and regulation may ultimately determine where the next generation of financial infrastructure is created.