Bank of England drops stablecoin holding limits

TLDR

The Bank of England has scrapped planned wallet level caps on sterling stablecoins and replaced them with a 40 billion issuance ceiling per systemic token, while easing reserve rules.

1. The original plan to cap individuals at 20,000 and businesses at 10 million per stablecoin has been dropped in favor of a temporary 40 billion issuance cap per coin.
2. Issuers can now hold up to 70% of reserves in short term UK government debt, improving economics and making GBP stablecoins more viable for payments, settlement, and collateral.
3. The regime targets fully regulated sterling stablecoins from around 2027, with open questions around how long the cap lasts and whether GBP tokens can compete with dollar stablecoins.

Deep Dive

1. What Exactly Changed

In a policy statement and draft Code of Practice, the Bank of England reversed course on proposed wallet level caps that would have limited individuals to 20,000 and businesses to 10 million per sterling stablecoin, and instead introduced a temporary 40 billion aggregate issuance cap for any single systemic stablecoin. Reports from Bloomberg and CoinDesk note that users and firms will now face no direct limit on how much of a regulated GBP stablecoin they can hold or transfer, with the constraint moving to total supply size per token.

The 40 billion ceiling is explicitly framed as a guardrail to manage systemic risk while the market develops, and is expected to be reviewed and potentially removed as the framework beds in ahead of a targeted 2027 launch for fully regulated pound tokens.

2. What It Means For Users And Issuers

For users and institutions, removing wallet caps makes sterling stablecoins far more practical for larger balances, wholesale settlement and collateral, and GBP liquidity pools on exchanges and DeFi, because platforms no longer need to track per user limits across wallets and venues. Commentators highlight that this change removes a key obstacle to using GBP stablecoins for payment rails and cross border flows.

For issuers, the Bank has relaxed reserve composition rules so that up to 70% of backing assets can sit in short term UK government debt, with the remaining 30% in non interest bearing central bank deposits, which improves yield on reserves while preserving high quality backing. Issuers must still redeem at par within 24 hours, and cannot pay yield directly on holdings, although activity based rewards are likely allowed.

3. Limits, Risks, And What To Watch Next

The 40 billion cap is significant in sterling terms, but still well below leading dollar stablecoins, so any single GBP token will remain smaller than USDT or USDC in the near term. The Bank itself acknowledges that if demand exceeds the cap, scarcity could push a token to trade above par, creating a new kind of tension between market demand and the guardrail.

Regulators are trying to prevent rapid outflows from bank deposits into stablecoins that could affect credit provision, which is why the cap and central bank deposit component remain in place. Key open questions flagged by industry include how long the cap stays, whether systemic GBP stablecoins can be used in core wholesale market settlement, and which issuers are designated as systemic as the UK approaches its 2027 digital money regime.

Conclusion

By dropping wallet level holding limits and shifting to a system wide issuance cap with more flexible reserve rules, the Bank of England has made regulated GBP stablecoins meaningfully more usable while keeping a firm grip on systemic risk. The next phase is about implementation: which issuers are approved, how quickly the 40 billion guardrail is revisited, and whether sterling tokens can gain real share in a market still dominated by dollar stablecoins.