BoE reviews controversial stablecoin reserve caps

TLDR

The Bank of England is rethinking its controversial stablecoin holding caps and reserve rules after strong pushback from crypto and fintech firms.

1. Officials are reviewing plans for a 20,000 per person holding cap and a requirement that 40% of reserves sit at the BoE earning no interest.
2. Industry argues these rules make GBP stablecoins uneconomic versus dollar rivals and could push issuers and innovation out of the UK.
3. Draft softened rules are expected later in 2026 and will shape whether sterling stablecoins become meaningful alternatives to USDT and USDC in payments and DeFi.

Deep Dive

1. Caps And Reserves Under Review

In the current consultation, the BoE proposed that individuals be limited to about 20,000 in any single UK stablecoin, with businesses capped at around 10 million during a transition phase, while issuers of systemic sterling stablecoins must hold at least 40% of backing assets as non?interest?bearing deposits at the central bank and the rest in short term UK government debt. These details are outlined in summaries of the November 2025 consultation and recent comments from Deputy Governor Sarah Breeden, who said the approach may have been overly conservative and is being reconsidered in light of feedback from the digital asset industry.

The regime is still at consultation stage, with officials signalling that both the holding caps and the 40 percent reserve floor could be adjusted before draft rules are published in mid to late 2026.

2. Why The Rules Were So Controversial

Issuers typically earn their revenue from the yield on safe assets like Treasury bills or gilts held against stablecoins. Forcing 40 percent of reserves into non?yielding BoE deposits materially cuts that income, while still requiring full backing, which multiple commentators say would make UK stablecoins far less profitable than competitors under US and EU regimes. Analyses comparing the BoE plan with Circles USDC note that Circle reportedly keeps about 88 percent of reserves in interest?bearing instruments, and that cutting the BoE reserve floor from 40 percent to 20 percent would roughly halve the cost drag for UK issuers and move economics closer to MiCA and US practice.

Market participants also argue that monitoring user caps across wallets and venues is operationally hard and could cripple use cases like corporate treasury, payroll and settlement, undermining Britains stated goal of being a competitive digital asset hub.

3. What To Watch Next

Global stablecoin capitalization is around the hundreds of billions of dollars, with sterling tokens still a tiny fraction of the market and most activity concentrated in dollar products such as USDT and USDC. If the BoE follows through with a lower non?yielding reserve requirement and more flexible or time?limited caps, UK regulated GBP stablecoins could become viable for payment and settlement, especially in domestic UK use cases.

Conversely, if caps and reserve rules stay tight, issuance may migrate to more permissive jurisdictions, or UK users may simply continue to rely on offshore dollar stablecoins, leaving the UK with less influence over a key layer of future payments infrastructure.

Conclusion

The BoEs review of stablecoin caps and reserve requirements is a pivot from pure caution toward a search for balance between financial stability and competitiveness. How far the central bank moves on the 20 thousand pound holding cap and the 40 percent non?interest?bearing reserve floor will determine whether GBP stablecoins emerge as serious, regulated payment instruments or remain sidelined while dollar tokens continue to dominate crypto and tokenized finance.