The Bank of England is reconsidering key parts of its proposed stablecoin regulations, including a controversial 40% reserve floor that could cost issuers £11.2 million annually per £1 billion in circulation. Deputy Governor Sarah Breeden told the Financial Times that officials are exploring alternative approaches to manage risks, acknowledging the industry's preference for holding more interest-earning assets. The potential shift comes as the BoE aims to create a workable regime for stablecoins, with Executive Director Sasha Mills stating that applications from systemic stablecoin issuers may be accepted by year-end. Observers note that lowering the reserve floor to 20% could significantly reduce costs for issuers and align UK rules with MiCA and US standards. However, Governor Andrew Bailey warned of a potential clash with the US over weaker redemption rules, which could transfer stress to the UK during crises. The Bank's willingness to revisit its proposals signals a move toward a more flexible framework balancing innovation and financial stability.

Key facts

• BoE's proposed 40% reserve floor could cost issuers £11.2M per £1B in circulation.
• Deputy Governor Breeden says Bank exploring alternative approaches to stablecoin risks.
• Executive Director Mills expects to accept systemic stablecoin applications by year-end.
• Governor Bailey warns of potential UK-US clash over weaker stablecoin redemption rules.
• Observers see shift toward more flexible regime as BoE signals willingness to revisit proposals.