Bank of England Caps Pound Stablecoins at £40B, Raises Gilt Allowance to 70% 🏦

The Bank of England on Monday published a policy statement and draft rules for systemic stablecoins, replacing proposed per-holder limits with a temporary £40 billion ($52.8 billion) issuance cap per stablecoin. The central bank said the cap, which replaces the per-individual and per-business holding limits floated in its November 2025 consultation, will be reviewed regularly and lifted once risks to credit provision are addressed. Under the new framework, systemic stablecoin issuers will be permitted to hold up to 70% of reserves in interest-bearing government debt, up from the 60% proposed earlier, with the remaining 30% in unremunerated central bank reserves. HM Treasury will determine which stablecoins fall within the systemic regime, while non-systemic stablecoins used mainly for crypto trading will continue to be supervised by the Financial Conduct Authority.

The Bank had previously proposed limits of £20,000 per individual and £10 million per business per stablecoin, arguing the measures were needed to prevent large-scale deposit shifts out of the banking system that could constrain lending to households and businesses. Respondents to the consultation warned that those caps would limit usability of sterling stablecoins, create operational challenges for issuers, and make UK-issued tokens less competitive against dollar-backed rivals such as $USDC and $USDT. The BoE said the new approach is intended to achieve the same policy objective of protecting credit availability while allowing unrestricted use by households and businesses.

Deputy Governor Sarah Breeden said in May that the Bank was reconsidering its proposed holding limits and reserve requirements after receiving feedback from digital asset companies. The Bank's policy statement on Monday confirmed the shift, defining systemic stablecoins as those widely used for payments and capable of posing risks to UK financial stability. The BoE said it aims to finalize the rulebook by the end of 2026, with a planned rollout in 2027.