Bank of England eases UK stablecoin rules

TLDR

The Bank of England has softened its planned UK stablecoin regime to make sterling-backed tokens more commercially viable while keeping strong safeguards.

1. The BoE scrapped individual holding caps and replaced them with a temporary 40 billion issuance limit per systemic GBP stablecoin, plus looser reserve rules for issuers.
2. Issuers can now hold up to 70% of reserves in interest?bearing UK government debt, which should improve business models and make GBP stablecoins more usable at scale.
3. The framework is still cautious and only covers systemic payment stablecoins, with final rules and first regulated GBP stablecoins targeted around 2027.

Deep Dive

1. What Changed In The Rules

In its policy statement and draft rulebook, the Bank of England dropped earlier plans to cap user holdings at 20,000 per person and 10 million per business for sterling stablecoins. Instead, it will apply a temporary 40 billion issuance cap per systemic stablecoin as a guardrail on overall size, while allowing users and firms to hold unlimited amounts of that token. This is confirmed across several reports, including detailed coverage of the new 40 billion cap and removal of wallet limits in the updated framework.

The BoE also relaxed its reserve composition proposal. Systemic issuers can now hold up to 70% of reserves in short term UK government debt, with 30% kept as non interest bearing deposits at the Bank, up from a previous 60/40 split in favor of gilts. This change is described as a core part of the eased framework in the new guidance for systemic stablecoins.

2. Impact On Issuers, Users And UK Competitiveness

For issuers, the higher share of interest bearing reserves should materially improve economics compared with the old design, which forced more capital into zero yield central bank deposits. Market coverage notes that the 70/30 structure is intended to support viable business models while maintaining liquidity and fast redemptions.

For users and crypto businesses, removing per wallet caps makes GBP stablecoins far more practical for treasury, settlement and collateral, especially for larger balances. Analysts highlight that this eases the path to GBP liquidity pools and institutional use without the operational burden of tracking every wallet against a hard limit.

3. Remaining Constraints And What To Watch

The regime still focuses on systemic payment stablecoins, defined as those widely used in UK payments, with HM Treasury deciding which tokens fall in scope. Tokens mainly used for trading remain under the Financial Conduct Authority, so this is not a free for all for every crypto stablecoin.

Industry groups welcome the shift but describe the framework as conservative, pointing to the 30% zero yield reserve slice and uncertainty around how long the 40 billion cap will stay in place. Several commentators also question whether GBP stablecoins will be allowed for wholesale settlement, which will matter for large banks and tokenized collateral markets.

Key next milestones are the consultation window into late 2026 and publication of a final code of practice, with multiple outlets reporting a target for regulated systemic GBP stablecoins to operate from around 2027.

Conclusion

The BoE has clearly pivoted from user level caps to system level guardrails, making life easier for serious GBP stablecoin issuers while still constraining systemic risk through issuance caps and strict reserves. For crypto users and builders, this opens a plausible path to regulated pound stablecoins in UK payments and DeFi, though the regime remains cautious and its real impact will depend on how many issuers actually seek authorization and how the rules are applied in practice.