Bank of England softens stablecoin rules

TLDR

The Bank of England has relaxed its planned sterling stablecoin rules while keeping tight oversight on systemic risk.

1. The BoE dropped proposed per-user holding limits and instead set a temporary 40 billion issuance cap for each systemic GBP stablecoin, while easing reserve rules.
2. Issuers can now keep up to 70% of reserves in short-term UK government debt and 30% as non-interest-bearing BoE deposits, improving business viability but keeping strict 24-hour redemption and safety standards.
3. Final rules are due by end-2026 with a target 2027 launch, so GBP stablecoin rails could grow, but the cap and bank-funding concerns may still limit how big they get.

Deep Dive

1. What Actually Changed

In its June 2026 policy statement, the Bank of England scrapped earlier plans to cap individual stablecoin holdings at 20,000 for people and 10 million for businesses, after industry pushback that these limits would kill usage at scale. Instead, it introduced a temporary 40 billion issuance cap per systemic sterling stablecoin, focusing on total circulation rather than per-wallet limits. Multiple reports highlight that this cap is described as a "guardrail" that will be reviewed and potentially removed as the market matures and bank-funding risks are better understood.

Reserve rules were also softened. Earlier drafts required 40% of reserves as cash at the BoE and 60% in gilts. The final framework allows 70% in short-term UK government debt and only 30% in non-interest-bearing BoE deposits, giving issuers more yield while keeping reserves highly liquid and low risk.

2. Impact On Issuers And Users

For systemic GBP stablecoin issuers, the new mix - no wallet caps, but a 40 billion total issuance guardrail and more flexible reserves - makes it easier to design profitable products while remaining heavily supervised. Systemic coins must still be redeemable at par within 24 hours, with no ability to suspend redemptions or impose minimum redemption sizes, and reserves must sit in gilts plus BoE deposits rather than commercial bank deposits or money market funds.

Non-systemic stablecoins used mainly for crypto trading, like USDT or USDC, remain under the Financial Conduct Authority rather than the BoE, but any sterling token that grows into mainstream payments could be pulled into this stricter, BoE-led regime.

3. What To Watch Next

The BoE and UK regulators are running a consultation window into late 2026, aiming to finalize the code of practice by year-end and enable systemic sterling stablecoins to operate under the new rules from 2027. Key open questions include how long the 40 billion cap remains, which specific GBP stablecoins (if any) get designated systemic, and whether they will be allowed for settlement in core wholesale markets like securities clearing.

There is also a competitive angle. The UK is positioning this framework between the EUs MiCA-style conservatism and more permissive US dollar stablecoin pushes, but industry groups warn that the 30% non-interest-bearing deposit requirement and issuance cap could still hold sterling tokens back relative to dollar and euro rivals.

Conclusion

By dropping per-user holding caps and easing reserve rules, the Bank of England shifted from very restrictive proposals to a more pragmatic framework that can support viable GBP stablecoins while still capping systemic risk. For crypto users and builders, this clears a path for regulated sterling stablecoins in payments, DeFi, and settlement, but the real impact will depend on how fast the cap is relaxed, which tokens become systemic, and how UK rules stack up against competing dollar and euro regimes.