Bank Of England Drops Stablecoin Holding Caps

BoE Scraps Individual Holding Limits

The Bank of England has published its final policy framework for systemic sterling-denominated stablecoins, marking a significant pivot from earlier proposals that drew widespread criticism from the crypto industry.

The most contentious element of the original draft, individual holding caps, has been dropped entirely. The Bank had previously proposed temporary holding limits of £20,000 per coin for individuals and £10 million for businesses. Some observers warned those caps risked making the UK uncompetitive relative to other markets with no such restrictions, and crypto companies labelled them among the most punitive policies globally.

In place of individual caps, a temporary issuance guardrail will apply to each systemic stablecoin, initially set at £40 billion, delivering the same policy outcome while being cheaper and easier to implement and allowing unrestricted use by households and businesses. This guardrail will be reviewed regularly and removed once risks to credit provision have been addressed.

Reserve Requirements Also Eased

The framework also includes a relaxation of reserve backing requirements. The maximum share of backing assets that can be held in interest-bearing instruments, specifically short-term UK government debt, has been increased from 60% to 70%, with the remainder held in central bank deposits. The Bank of England expects central bank deposits to be used to meet redemption requests and has acknowledged that temporary deviations from the prescribed ratio may occur to meet large unanticipated redemption requests.

Non-systemic stablecoin issuers will continue to be regulated by the FCA. Where a stablecoin is recognised as systemic by HM Treasury, it will transition into the Bank's regime and will be jointly regulated, with the Bank overseeing prudential and financial stability risks and the FCA continuing to supervise conduct and consumer protection.

Sarah Breeden, Deputy Governor for Financial Stability, described the publication as a major milestone in delivering greater choice and innovation in UK payments, saying the Bank has set out the foundations of trust for a new form of money, calling it "a world leading regime." Subject to feedback by 22 September 2026, the Bank intends to finalise the Code of Practice by the end of 2026, which would allow regulated stablecoins to operate in the UK from 2027.

Sources:
FX News Group: BoE Consults on Regulation of Systemic Stablecoins
Bank of England: Consultation on Regulating Systemic Stablecoins
CoinDesk: UK House of Lords Committee Calls on BoE to Reconsider Stablecoin Restrictions