BoE rethinks strict stablecoin holding caps

TLDR

The Bank of England is preparing to soften its planned caps on stablecoin holdings and reserves after criticism that they were too strict and hurt UK competitiveness.

1. Earlier proposals capped individuals at 20,000 per UK stablecoin and businesses at 10 million, with at least 40% of reserves parked at the BoE, but these limits are now under review.
2. Looser caps and lower non?interest reserve requirements would make GBP stablecoins more commercially viable and help them compete with dominant dollar tokens such as USDT and USDC.
3. Updated draft rules expected around mid?2026 will show whether the BoE actually scraps caps, trims reserve floors, and how it balances financial stability with innovation.

Deep Dive

1. What BoE Is Changing

In a 2025 consultation, the Bank of England proposed temporary caps limiting individuals to 20,000 per sterling stablecoin and businesses to about 10 million, alongside a reserve rule forcing issuers to hold at least 40% of backing assets as non?interest?bearing deposits at the BoE, with the rest in short term UK government debt. These measures were justified as a way to prevent rapid deposit outflows from banks if stablecoins gained traction in payments, and to ensure very high liquidity under stress, drawing on episodes such as the Silicon Valley Bank run.

Deputy governor Sarah Breeden has since said the approach may have been overly conservative, and reports from outlets such as CoinDesk and Decrypt note that the BoE is now actively exploring alternatives to both the 20,000 cap and the 40% reserve floor, potentially removing or relaxing them after industry feedback that they are operationally cumbersome and uneconomic.

2. Why This Matters For Stablecoins

Industry groups and prospective issuers argued that strict holding caps are hard to enforce across multiple wallets and venues, and that large non?yielding reserves would compress margins and make UK issuance unattractive compared with US and EU regimes, where a higher share of reserves can sit in interest?earning assets. Analysis cited by Decrypt suggests that a 40% non?interest floor could cost a UK issuer roughly 11.2 million per year per 1 billion in circulation, whereas cutting that floor to 20% would roughly halve the drag and bring economics closer to MiCA?style rules in the EU.

All of this plays out against a global stablecoin market of roughly the high?hundreds of billions of dollars that is still dominated by dollar tokens like Tether (USDT) and USDC, with sterling stablecoins representing a tiny share. Making GBP stablecoins economically viable while still tightly regulated could encourage more onshore issuance, support tokenized settlement in pounds, and reduce reliance on offshore dollar tokens in UK?facing payment and DeFi use cases.

3. What To Watch Next

The current regime is still at the consultation stage, with multiple reports pointing to updated draft rules expected around June 2026 and final rules later in the year. Key details to watch include whether the retail 20,000 cap is scrapped entirely or replaced by other safeguards, how far the 40% non?interest reserve requirement is reduced, and what kind of liquidity or backstop arrangements the BoE offers in return.

There is also a geopolitical angle. UK officials have warned that weaker US standards on dollar stablecoins could export stress into other jurisdictions, which means the BoE may still insist on higher safety bars than some competitors, even if it eases from its most conservative stance. The balance it strikes will influence whether GBP stablecoins emerge as serious payment infrastructure or remain a niche alongside dominant dollar tokens.

Conclusion

The BoEs rethink signals that regulators are moving away from a maximum caution at any cost stance toward a more calibrated regime that still prioritizes safety but acknowledges commercial realities. For crypto users and issuers, the outcome will determine whether GBP stablecoins can scale within a regulated UK framework or whether the UK continues to rely primarily on offshore dollar stablecoins for digital money use cases.