Bank of England rethinks strict stablecoin caps

TLDR

The Bank of England is backing away from its strict plan to cap how much stablecoin users can hold and is exploring looser, system?wide limits instead.

1. Earlier proposals capped individuals at about 20,000 and businesses at 10 million per UK stablecoin, plus a 40% non?interest reserve at the BoE, which the industry called unworkable.
2. Officials now signal those rules were "overly conservative" and are considering temporary guardrails on total stablecoin issuance and lighter reserve requirements to protect stability at lower cost.
3. Draft rules due around mid?2026 will determine whether GBP stablecoins can scale as serious payment rails or remain niche compared with dollar?pegged tokens.

Deep Dive

1. What Is Changing In The BoE Plan

The original framework for systemic sterling stablecoins proposed temporary caps of 20,000 per coin for individuals and around 10 million for businesses, plus a requirement that at least 40% of reserves sit as non?interest deposits at the BoE, with the rest in short term UK debt. Industry groups warned this combination would make UK stablecoins uneconomic and hard to use at scale for payroll, treasury and settlement.

Deputy Governor Sarah Breeden has since said these ownership limits and reserve rules may have been "overly conservative", and that the BoE is "genuinely open" to other ways of managing run risk, including supply focused guardrails that cap the total amount of stablecoins issued instead of per wallet holdings. Reports highlight this pivot toward temporary issuance guardrails as a cheaper way to protect bank funding than individual caps while supporting high value use cases for corporates.

2. Impact On Stablecoin Adoption And Competition

Sterling stablecoins are currently a tiny slice of a global stablecoin market above 300 billion dollars, which is dominated by dollar tokens like USDT and USDC. UK rules that force 40% of reserves into cash at the BoE with zero yield, plus user caps, would leave British issuers at a structural profit disadvantage compared with US and EU regimes, limiting GBP stablecoin liquidity and use.

If the BoE cuts the reserve floor, for example from 40% to nearer 20%, analysis suggests it would roughly halve the profit drag per 1 billion dollars of issuance, bringing economics closer to issuers under MiCA and in the US. A softer regime could therefore make it viable to launch larger, payment focused GBP stablecoins instead of routing everything through dollar coins.

3. Timelines, Unknowns And Key Risks

The BoE plans updated draft rules around June 2026, with final adoption targeted by year end, in parallel with broader UK crypto legislation. Critical open questions include how tight any total issuance guardrails will be, whether per user limits disappear entirely, and how far the reserve split is relaxed.

Regulators still focus on two risks: rapid flows from bank deposits into stablecoins during stress, and weak redemption standards if foreign dollar tokens gain UK footprint without equivalent safeguards. That tension between financial stability and competitiveness will shape the final text more than industry lobbying alone.

Conclusion

The BoE is clearly retreating from its harshest stablecoin ideas, moving away from strict personal caps and very heavy non?interest reserve requirements toward more nuanced guardrails. If revised rules materially reduce the economic penalty for issuing GBP stablecoins while keeping robust backing and redemption standards, the UK could emerge as a credible venue for regulated payment tokens rather than ceding the field entirely to dollar stablecoins.