The Bank of England has softened its proposed restrictions on stablecoins to prevent the UK from losing ground in the global digital asset race. Regulators scrapped strict individual and business ownership limits, replacing them with a temporary issuance cap of £40bn for systemic stablecoins. This shift follows heavy criticism from crypto firms who feared the original rules were too restrictive.

To improve business viability, the central bank lowered the required amount of non-interest-earning assets held in central bank accounts from 40 per cent to 30 per cent. These changes aim to attract pound-based tokens, which currently make up less than 0.5 per cent of the $315bn global market. US dollar tokens continue to dominate the sector's liquidity.

Critics, including Clear Bank, argue that rules for commercial banks remain too tight. Banks must issue tokens through separate, insolvency-remote entities, making the process difficult. While the Bo E will ban interest payments, it will allow credit card-style rewards for transactions. Final rules are expected by year-end, allowing regulated stablecoins to launch next year.