Bank of England Scraps Stablecoin Holding Caps in Final Rules

Background

In November 2025, the BoE proposed strict rules for systemic sterling stablecoins. These are GBP-denominated stablecoins that could become widely used for payments and affect UK financial stability. The original plan included a £20,000 holding cap for individuals and a £10 million cap for businesses, with limited exemptions for larger firms. The BoE designed these caps to reduce the risk of large deposit outflows from banks into stablecoins.

However, the crypto and fintech industry pushed back. Exchanges, wallets, custodians, payment apps, and issuers argued that per-user caps would be hard to track and enforce across different platforms. More importantly, those caps would weaken the core use case of stablecoins. Businesses, market makers, exchanges, and institutions often need larger balances for settlement, liquidity, payroll, and treasury management.

The final framework marks a clear shift. Instead of controlling each user’s balance, the BoE will now control the overall size of each systemic stablecoin product through a temporary £40 billion issuance guardrail. It also raised the amount issuers can hold in short-term UK government debt from 60% to 70%, with the remaining 30% held in non-interest-bearing deposits at the Bank of England.

Key Features of the New Systemic Stablecoin Regime

The new regime applies to sterling-denominated stablecoins that HM Treasury recognizes as systemic. Once recognized, the Bank of England oversees the stablecoin from a financial stability perspective, while the FCA remains involved in issuance, custody, conduct, and consumer protection.

The biggest change is the removal of individual and business holding caps. The BoE has replaced the proposed £20,000 retail cap and £10 million business cap with a £40 billion issuance limit per systemic stablecoin product. This gives issuers more room to build usable products while still giving regulators a macro-level control over scale.

Reserve rules have also changed under the Bank of England stablecoin rules. Issuers can hold up to 70% of backing assets in short-term UK government debt with residual maturity of six months or less. They must hold the remaining 30% in unremunerated deposits at the Bank of England. This improves issuer economics compared with the earlier 60% government debt proposal, but it still keeps the framework conservative.

The BoE also requires 1:1 backing at all times. Issuers must redeem coins at par within 24 hours after a complete request, subject to AML and KYC checks. The framework does not allow issuers to suspend redemptions, even under stress. This makes redemption reliability a core part of the regime.

Backing assets and reserves must sit under statutory trust arrangements, which gives coinholders stronger protection if an issuer fails. The BoE will also allow overnight repo and reverse repo under strict safeguards and overcollateralisation. However, commercial bank deposits cannot count as backing assets.

Finally, issuers cannot pay interest to coinholders. The BoE wants systemic stablecoins to work as payment money, not tokenized investment products. Activity-based rewards may be allowed if they relate to payments or usage, but rewards based purely on holding time remain outside the framework.

Implications for Issuers, Payments Innovation, and UK Competitiveness

The removal of holding caps makes sterling stablecoins much more usable. Under the earlier proposal, a business could quickly hit the £10 million limit during normal settlement or treasury activity. That would have made GBP stablecoins unattractive for institutions, exchanges, fintech firms, and payment networks.

Now, issuers can design products for larger real-world use cases. Sterling stablecoins could support merchant settlement, exchange liquidity, payroll, cross-border payments, tokenized securities, treasury management, and DeFi activity denominated in GBP. This matters because the stablecoin market remains heavily dominated by US dollar assets.

The new structure also reduces operational complexity. Instead of forcing platforms to monitor each user’s holdings across wallets and venues, the BoE will manage risk at the product level. That is easier to implement and better suited to crypto market structure, where assets move across exchanges, self-custody wallets, payment apps, and DeFi protocols.

Still, the regime has limits. The 30% non-interest-bearing deposit requirement creates an opportunity cost. Some issuers may view it as a drag on profitability compared with jurisdictions that allow more reserves in yield-generating instruments. The £40 billion issuance cap may also feel restrictive for large global issuers if GBP stablecoins scale meaningfully.

Timeline, Next Steps, and Global Context

The BoE began shaping its stablecoin policy through a 2023 discussion paper. In November 2025, it released a detailed consultation that proposed holding caps, reserve rules, and prudential requirements for systemic sterling stablecoins. After industry feedback and parliamentary pressure, the BoE adjusted its approach in 2026.

The draft Code of Practice remains open for feedback until September 2026. The Bank aims to finalize the regime by the end of 2026, with supporting materials and guidance expected in 2027. Regulated systemic sterling stablecoins could begin launching from 2027 if issuers meet the final requirements.

Globally, the UK is trying to position itself between strict financial stability oversight and practical market access. The EU’s MiCA framework focuses on authorization, reserves, governance, and redemption without equivalent per-holder caps.