Bank of England drops stablecoin holding caps

TLDR

The Bank of England has removed planned caps on how much stablecoin each user can hold and replaced them with a 40 billion issuance cap per sterling stablecoin.

1. The BoE dropped proposed limits of 20,000 per person and 10 million per business and instead set a temporary 40 billion issuance guardrail for each systemic sterling stablecoin.
2. Issuers can now hold up to 70% of reserves in short-term UK government debt, improving yield and making regulated GBP stablecoins more commercially viable.
3. The regime targets a 2027 launch and could make regulated GBP stablecoins more useful for payments and DeFi, but overall scale is still constrained by the issuance cap and reserve rules.

Deep Dive

1. What Exactly Changed

In its final policy and draft rulebook, the Bank of England scrapped earlier plans to cap individual holdings of systemic sterling stablecoins at 20,000 for users and 10 million for businesses.

Instead, it introduced a temporary issuance limit of 40 billion per systemic stablecoin, meaning total supply is capped but any user or institution can, in principle, hold unlimited amounts of that token. This shift is confirmed across multiple reports on the BoEs eased stablecoin rules with a 40 billion cap.

2. How Reserve Rules And Economics Changed

The BoE also relaxed how issuers can hold backing assets. Up to 70% of reserves can now be invested in short-term UK government bonds, up from a previously proposed 60%, with the remaining 30% left as non-interest-bearing central bank deposits.

That mix allows issuers to earn more yield on reserves while keeping a significant liquidity buffer at the BoE to ensure 1:1 redemptions within 24 hours during stress. Industry feedback had warned that higher non-yielding deposits would make GBP stablecoins uneconomic versus dollar or euro rivals.

3. Why It Matters For Crypto And What To Watch

The framework applies to systemic pound-backed stablecoins intended for payments, not trading-only tokens, and sits alongside FCA rules for non-systemic coins. The goal is a regulated GBP stablecoin market around 2027 that can plug into UK payments, tokenized securities and possibly DeFi.

For crypto markets, this could mean deeper GBP liquidity pools on exchanges and on-chain, easier GBP on/off-ramps, and more institutional comfort using regulated GBP stablecoins in settlements and collateral.

Key watchpoints are how many issuers actually seek BoE authorization, whether the temporary 40 billion cap is raised or removed over time, and whether GBP stablecoins can be used in core wholesale markets, which will decide how big this segment can become.

Conclusion

By dropping user-level holding caps and replacing them with a system-wide 40 billion issuance ceiling, while improving reserve economics, the BoE has moved from a very cautious stance to a more balanced, payments-focused regime.

If issuers embrace it, regulated GBP stablecoins could become meaningful rails for UK and cross-border crypto flows, but their ultimate impact will depend on how the cap evolves and how far regulators let them into mainstream financial infrastructure.