Bank of England eases planned stablecoin limits

TLDR

The Bank of England is signalling it will relax some planned limits and reserve rules for UK pound stablecoins after strong industry pushback.

1. Officials are reconsidering retail and corporate holding caps and a 40 percent non interest bearing reserve requirement they now describe as potentially overly conservative.
2. Softer rules would improve economics for GBP stablecoin issuers and support the UKs digital asset ambitions, while the Bank still focuses on bank funding and financial stability.
3. Updated draft rules expected around June 2026 will show whether caps are scrapped, reserve floors cut, and how strict the final framework is for payment stablecoins.

Deep Dive

1. What The BoE Is Easing

The BoEs earlier plan for systemic sterling stablecoins capped individual holdings at about 20,000 per coin and business holdings at 10 million, and required at least 40 percent of reserves to sit as non interest bearing deposits at the central bank, with the rest in short term UK government debt.

Deputy Governor Sarah Breeden has now said these measures may have been overly conservative and that the Bank is genuinely open to other ways of managing risk, including revisiting both the caps and the 40 percent floor on central bank deposits, according to reports from the Financial Times summarised by outlets such as Coindesk and Yahoo Finance.

Importantly, this is still a consultation stage. The BoE has not yet formally changed the rules, but it has clearly signalled a willingness to water down the most restrictive elements in the upcoming draft regime.

2. Why It Matters For Crypto

Under the current proposals, UK issuers must park a large slice of reserves at the BoE earning zero interest, which, combined with holding caps, makes sterling stablecoins far less profitable than dollar tokens like USDT and USDC that can hold more yield bearing assets.

Several analyses note that sterling stablecoins are a tiny fraction of the roughly 300 billion dollar global stablecoin market, and that harsh UK rules could simply drive issuers to launch offshore under US or EU frameworks such as MiCA. The BoEs softening stance, highlighted in reports that it is reconsidering caps and reserve floors, aims to avoid this competitiveness problem while still addressing bank deposit outflow risks.

For users and fintechs, a more flexible regime could make GBP stablecoins more viable for payments, corporate treasury and tokenised finance, but they should still expect tight rules on redemption, disclosures and risk management.

3. What To Watch Next

Breeden and other officials have indicated that revised draft rules are due around June 2026, with further consultation and a final framework later in the year. These drafts will clarify three key points.

1. Whether the 20,000 and 10 million holding caps are scrapped, raised or replaced by more targeted tools.
2. How far the non interest bearing reserve floor is cut, which directly affects issuer economics.
3. How responsibilities are split between the BoE, which will supervise systemic payment stablecoins, and the FCA for smaller issuers.

Confidence: high because multiple independent outlets report the same BoE comments and policy direction.

Conclusion

The BoE is shifting from a very cautious, cap heavy stablecoin framework toward a more flexible model that still prioritises financial stability. For crypto participants, the real impact will depend on how much it cuts reserve constraints and relaxes ownership limits in the coming draft rules, which will determine whether GBP stablecoins can realistically compete with established dollar stablecoins in payments and DeFi.