Bank of England softens stablecoin issuance caps

TLDR

The Bank of England has watered down its earlier stablecoin plans by scrapping wallet level caps and easing issuance and reserve rules for sterling stablecoins.

1. The BoE dropped proposed user holding limits and replaced them with a temporary 40 billion issuance guardrail per systemic pound stablecoin, while loosening reserve requirements.
2. The changes make GBP stablecoins more usable for larger balances and more economical to issue, but the aggregate cap still keeps any single pound token far smaller than leading dollar stablecoins.
3. Regulated GBP stablecoins are targeted for 2027, with open questions around how long the cap lasts, which coins are deemed systemic, and whether they will be allowed in key wholesale markets.

Deep Dive

1. What The BoE Actually Changed

Earlier drafts would have capped individual holdings at about 20,000 per person and 10 million per business per coin, plus stricter reserve rules. After industry pushback, the BoE has removed these wallet level caps and instead set a temporary 40 billion (about $53 billion) issuance ceiling for each systemic sterling stablecoin as summarized here.

At the same time, issuers can now hold up to 70 percent of reserves in short term UK government debt, up from 60 percent, with the remaining 30 percent in non interest bearing deposits at the BoE according to multiple reports. In early ramp up, some issuers may be allowed an even higher share in gilts. The 40 billion cap is explicitly framed as a transitional guardrail that will be reviewed and potentially removed once risks to bank lending and credit provision are judged manageable as noted in the policy coverage.

2. Impact On Stablecoin Issuers And Users

Dropping per-user caps removes a major operational headache for exchanges and wallets, which would otherwise have needed to track every account against limits as discussed by market participants. It also makes pound stablecoins more viable for larger balances, collateral, and settlement, including potential GBP liquidity pools in DeFi.

On the issuer side, being able to keep 70 percent of reserves in interest bearing government debt, instead of only 60 percent, improves economics while still keeping a sizable liquidity buffer at the central bank per the updated framework. But the 40 billion per coin cap is still well below the market size of major dollar stablecoins like USDT and USDC, and GBP stablecoins currently account for less than 0.5 percent of global stablecoin supply according to regulatory commentary.

3. Timeline, Scope And Open Questions

This regime targets systemic sterling stablecoins, meaning tokens widely used in payments and potentially relevant for financial stability. Oversight will be split between the BoE (systemic payment risks) and the Financial Conduct Authority, which handles issuance, custody, and trading of qualifying coins as laid out in the framework.

The BoE is consulting on the draft Code of Practice through late 2026 and aims to finalize rules by year end, with regulated GBP stablecoins expected to operate in the UK from 2027 %%CKPROTECTED0%%. Key unresolved points include how long the temporary 40 billion ceiling will last and whether these stablecoins will be allowed for settlement in core wholesale markets, which industry players argue is crucial for the UKs tokenization ambitions as highlighted by exchange policy leaders.

Conclusion

The Bank of Englands shift from strict wallet caps to a system wide issuance guardrail and more flexible reserves is a clear softening that makes a UK GBP stablecoin regime more practical. For crypto users and builders, it opens the door to deeper pound based liquidity and payment use cases, though the relatively low per-coin cap and slow rollout mean dollar stablecoins will likely dominate global flows for some time. The next inflection points will be which tokens are designated systemic, whether the cap loosens, and how far UK authorities go in allowing these coins into wholesale settlement and tokenized markets.