Bank of England eases systemic stablecoin rules

TLDR

The Bank of England has softened its planned rules for systemic sterling stablecoins while keeping a clear cap on their overall size.

1. The BoE scrapped proposed per-user holding limits and instead introduced a temporary 40 billion issuance cap per systemic stablecoin, alongside looser reserve requirements.
2. Issuers can now earn more yield on reserves, making GBP stablecoins more commercially viable while the BoE still enforces strict redemption and safety standards.
3. The framework targets a 2027 launch, and its impact will depend on how the cap evolves and whether these coins are allowed in core wholesale and DeFi markets.

Deep Dive

1. Key Rule Changes

Earlier proposals would have limited individuals to 20,000 and businesses to 10 million of a given sterling stablecoin. Those wallet-level caps have now been dropped and replaced with a temporary 40 billion issuance limit per systemic stablecoin, applied at the product level rather than per user, according to the BoEs policy statement and draft rules.

Issuers can now hold up to 70% of reserves in short term UK government debt, with the remaining 30% as non interest bearing deposits at the BoE, improving economics while keeping reserves in very safe assets. This is confirmed in multiple reports, including a Decrypt syndicated summary of the temporary 40 billion issuance cap and a breakdown of the up to 70% of reserves in short term government debt.

Stablecoins must still be redeemable at par within 24 hours, with no suspension of redemptions or minimum redemption amounts even in stress.

2. Impact On Issuers, Users, And UK Crypto

For issuers, the shift from 60% to 70% gilts and removal of user caps makes GBP stablecoins more commercially viable and scalable, particularly for payments, treasury, and settlement use cases.

For users and institutions, unlimited holdings per wallet mean GBP stablecoins can be used more naturally for large transfers, collateral, or market making, rather than being constrained by artificial balance limits.

The 40 billion cap, however, is a hard guardrail on the size of any single systemic GBP stablecoin, which may constrain long term growth compared with dollar or euro stablecoins if the cap is not raised or removed.

3. What To Watch Next

The BoE aims to finalize the regime by end 2026, with systemic stablecoins potentially operating under the new framework from 2027, per the policy statement and draft rules.

Key open issues include how long the temporary 40 billion cap lasts, which tokens HM Treasury designates as systemic, and whether these coins can be used for wholesale settlement and large scale DeFi or trading liquidity pools.

Market structure risk remains in focus: regulators still worry about deposits migrating from banks into stablecoins, so further adjustments are possible if adoption accelerates or banks push back.

Conclusion

The Bank of England has moved from a very restrictive design toward a more market workable regime that removes user caps and allows yield on most reserves, while still capping each systemic GBP stablecoins total size. For crypto users and issuers, this brings clearer, friendlier conditions for launching and using regulated sterling stablecoins in the UK, but the eventual importance of GBP stablecoins will depend on how the issuance cap and wholesale use rules evolve over the next few years.