Bank of England relaxes UK stablecoin rules

TLDR

The Bank of England has eased some of its planned stablecoin rules to avoid choking the UK market while still keeping tight prudential controls.

1. The BoE dropped strict per-user holding limits and instead proposes a 40 billion issuance cap per systemic sterling stablecoin, plus looser reserve rules that still favor high quality assets.
2. The framework aims to make regulated GBP stablecoins viable for retail payments from around 2027, putting the UK on a more competitive footing with US and EU regimes.
3. The details are still draft, with consultation running into 2026, so issuers and users should watch final caps, reserve composition, and how the UK coordinates with the FCA.

Deep Dive

1. What Actually Changed

Earlier UK proposals would have capped individuals at 20,000 and businesses at 10 million per stablecoin, which industry argued would make large scale use impractical.

The BoE now proposes a temporary 40 billion issuance cap per systemic sterling backed stablecoin instead of per holder limits, and allows issuers to keep up to 70% of reserves in short term UK government debt rather than the previously proposed 60%, with the rest in non interest bearing central bank deposits. This is laid out in revised guidance that softens its initial stance while keeping a strong safety focus.

Stablecoins must still be redeemable at face value within 24 hours and are not covered by the UKs 120,000 deposit insurance scheme, preserving a clear line between bank deposits and tokens backed by reserves in the issuer name.

2. Impact On Issuers And Users

The new model treats stablecoins as payment instruments, not speculative crypto, and is explicitly framed as a way to support innovation in UK payments while maintaining trust, according to deputy governor Sarah Breeden in a recent summary of the proposals.

For issuers of sterling stablecoins, the key constraints become: staying below the 40 billion issuance cap per coin, building reserve portfolios that are heavily gilts based, and integrating with BoE accounts for the non yielding reserve slice. That is a bank like prudential burden but offers regulatory clarity and access to central bank money.

For users and merchants, removing personal holding limits makes GBP stablecoins more practically usable for payroll, B2B flows, and larger treasuries, while the 24 hour redemption rule is intended to give confidence that tokens are cash like for payments.

3. Timeline, Open Questions, And Global Context

Consultation on the BoE proposals runs into late 2026, with a final Code of Practice targeted by year end and a regime that would allow regulated stablecoins to operate in the UK from 2027, alongside ongoing coordination with the FCA on conduct and promotions.

Key open questions include how long the 40 billion cap remains in place, how non UK issuers that serve UK users will be treated, and how strictly activity based rewards will be policed to avoid becoming disguised interest.

Globally, the move positions the UK between the US, where payment stablecoins are being tied to full reserve and bank level AML rules, and the EUs MiCA framework, which already governs euro stablecoins. The BoEs shift signals it does not want the UK excluded from stablecoin innovation while still guarding against systemic risk.

Conclusion

The Bank of England is relaxing the most restrictive parts of its draft stablecoin rules, especially user level caps, in favor of a system level issuance cap and clarified reserve rules.

That keeps strong guardrails on systemic risk while opening space for scalable, regulated GBP stablecoins that can compete with dollar tokens in payments, especially once the regime goes live around 2027.