BoE Puts a £40B Leash on Sterling Stablecoins — Holds the Caps on Holders 🪙

The Bank of England published a policy statement and draft rules on Monday outlining how regulated pound-backed stablecoins would operate in the United Kingdom, replacing previously proposed wallet-level caps with a temporary £40 billion ($52.8 billion) issuance limit per systemic stablecoin. The central bank said the guardrail "will be reviewed regularly and removed once risks to credit provision have been addressed." HM Treasury will determine which stablecoins fall within the systemic regime, while non-systemic tokens used mainly for crypto trading will continue to be supervised by the Financial Conduct Authority.

The framework marks a clear pivot from the BoE's November 2025 consultation, which had proposed holding limits of £20,000 per individual and £10 million per business for each stablecoin. The Bank had argued those limits were needed to prevent large-scale deposit shifts out of the banking system that could reduce credit availability for households and businesses. Respondents warned the restrictions would curb usability and create operational challenges for issuers, and in May Deputy Governor Sarah Breeden said the BoE was reconsidering its proposed holding limits and reserve requirements after digital asset companies argued the rules would hinder adoption and make UK-issued stablecoins less competitive with dollar-backed rivals.

Under the updated reserve rules, systemic stablecoin issuers will be permitted to hold up to 70% of backing assets in short-term UK government debt, up from the 60% proposed during consultation, with the remaining reserves held as unremunerated deposits at the Bank of England. The Bank said the change is intended to support more viable business models while preserving the ability to meet redemption requests during periods of significant outflows. Breeden, the Deputy Governor for Financial Stability, described the framework as "a major milestone in delivering greater choice and innovation in UK payments," adding that "innovation thrives on trust" and calling the regime "world leading" with "prompt redemption, strong protections and central bank support."

The Bank and the Financial Conduct Authority are developing a coordinated framework that will allow firms to transition from non-systemic to systemic status as they grow, with the BoE aiming to finalize its rulebook by the end of 2026 ahead of a planned 2027 rollout. The consultation on the draft Code of Practice runs until September 22, after which the central bank intends to clear the way for regulated sterling stablecoins to operate as part of the UK's financial infrastructure.