Bank of England scraps stablecoin holding caps, opts for £40 billion issuance ceiling instead
The Bank of England has abandoned plans to cap how much of a sterling-backed stablecoin any single person or company can hold, replacing the controversial proposal with a limit on the overall size of each stablecoin. Under its final framework for “systemic” UK stablecoins, total issuance of an individual sterling stablecoin will initially be restricted to £40 billion (about $52.8 billion).
At the same time, the central bank has relaxed some of the rules governing how issuers must hold reserves. Up to 70% of the backing assets for a regulated systemic stablecoin will now be allowed in short-term UK government debt, compared with the 60% ceiling put forward in earlier consultations. The remaining 30% will need to sit as non-interest-bearing deposits at the Bank of England.
Sarah Breeden, Deputy Governor for Financial Stability, framed the package as a compromise between innovation and risk management. According to her, the new regime is designed to protect users of a “new form of digital money” without choking off experimentation in the payments sector. She highlighted three pillars of the framework: clear redemption rights, user safeguards and an explicit role for the central bank as backstop.
The final rules are the culmination of months of negotiations between regulators, digital asset firms, legal advisers and would-be stablecoin issuers. A previous proposal, unveiled in November 2025, would have imposed strict temporary caps during an initial roll-out: individuals would have been limited to £20,000 of any single UK sterling stablecoin, while corporate users faced a ceiling of roughly $13.5 million.
At the time, the Bank of England argued that those holding limits were a necessary buffer. Officials feared that, if stablecoins quickly became popular as a means of payment, large volumes of deposits could migrate out of commercial banks into these new digital instruments, potentially disrupting credit supply and raising funding costs for lenders.
That earlier consultation also envisaged a more conservative reserve structure. At least 40% of each stablecoin’s backing assets would have had to be held as non-interest-bearing balances at the Bank of England, with the remainder invested in highly liquid, short-term UK government securities. The central bank saw this as a way to ensure immediate convertibility and resilience under stress.
Industry participants pushed back hard. Stablecoin firms and their advisers warned that ownership caps would be extremely difficult to monitor and enforce across multiple wallets, exchanges and custodians, especially when users could route transactions through different intermediaries or offshore venues. They also cautioned that forcing a large share of reserves into zero-yield deposits would damage the economics of issuing a sterling stablecoin, making the UK market less attractive.
In response to that feedback, Breeden signalled in May that the central bank was reconsidering both the proposed holding caps and the split between government debt and central bank deposits in reserve portfolios. The final framework, now confirmed, reflects that rethink: no direct limits on what any one user can hold, but an overall issuance cap and a slightly more flexible approach to how reserves can be structured.
The shift from individual caps to an aggregate issuance limit marks a significant change in regulatory philosophy. Instead of trying to track and limit each user’s exposure across the system, the Bank of England is effectively controlling the systemic footprint of each stablecoin by capping its total size. In theory, this allows stablecoins to function more naturally as means of payment and store of value for large users, while giving the central bank a clear threshold beyond which it might reassess risks to financial stability.
The £40 billion cap is being presented as an initial threshold rather than a hard permanent ceiling. Regulators are likely to revisit the figure as the market develops, assessing factors such as the number of issuers, the degree of concentration, the overlap with traditional bank deposits and the use cases that are actually emerging in practice.
Reserves remain at the heart of the stability question. Allowing 70% of backing assets to be held in short-term government debt gives issuers more scope to earn safe, predictable income on reserves, which can be used to cover operating costs, invest in infrastructure or pass some benefits back to users through lower fees. At the same time, the requirement to hold 30% as non-interest-bearing deposits at the Bank of England ensures a high degree of liquidity, enabling rapid redemption under stress scenarios.
The Bank is also keen to frame stablecoins not as an isolated experiment, but as one strand of a much broader digital money strategy. Alongside sterling-backed tokens, it is exploring tokenized bank deposits and still assessing the case for a retail central bank digital currency. The vision that Breeden outlined at City Week 2026 is one of “multiple forms of digital money” coexisting with traditional deposits, each serving slightly different needs but operating under common standards of safety and convertibility.
During that event, she also hinted at the direction the final framework has now taken, suggesting that system-wide issuance caps might be a more practical tool in the early stages of adoption than per-user limits. The official concern has been consistent: avoid a sudden, destabilizing drain of deposits from commercial banks, while still allowing new payment instruments to gain real traction.
These policy changes are unfolding as the UK advances several other tokenization projects. The Bank of England, together with the Financial Conduct Authority, has been developing rules for tokenized securities and updated market infrastructure, and their joint Digital Securities Sandbox is moving toward live commercial launches by participating firms. Stablecoins, in that context, are being positioned as part of the plumbing that could support programmable finance, 24/7 settlement and new trading models.
Globally, stablecoins have already demonstrated their appeal. Over the past few years, their total market value has surged as they are used for faster, cheaper transfers, particularly across borders where traditional banking rails are slow and expensive. The UK authorities are clearly wary of watching this activity happen entirely offshore, outside their regulatory perimeter, which would leave domestic users unprotected and reduce the central bank’s visibility into key payment flows.
At the same time, the Bank of England has reiterated a long-standing concern: if stablecoins scale up too far, too fast, they could divert a meaningful share of deposits away from commercial banks. That could, in turn, tighten credit conditions or force banks to rely more heavily on wholesale funding, making them more sensitive to swings in market sentiment. The new framework is the Bank’s attempt to manage that tension: give the market a regulated space to grow, but keep tight control over its maximum size and liquidity profile.
For prospective issuers, the final rules provide much-needed clarity. Firms now know the broad contours of what a UK-regulated systemic stablecoin will look like: a sterling-backed instrument, fully reserved in safe, liquid assets, subject to a £40 billion issuance limit and overseen directly by the central bank. This reduces regulatory uncertainty and may encourage both traditional financial institutions and specialist crypto companies to explore UK-based offerings.
Users, both retail and corporate, stand to benefit from this clearer policy stance. A stablecoin operating under Bank of England oversight, with strictly defined reserves and redemption rights, should be fundamentally different from unregulated or offshore tokens. Businesses could use such instruments for just-in-time treasury operations, instant supplier payments or cross-border settlements, while individuals might see smoother, faster peer-to-peer transfers and lower friction when moving between banks, fintech apps and digital asset platforms.
However, the framework also implicitly sets a high bar for entry. Maintaining sizable non-interest-bearing balances at the central bank, managing a predominantly government-debt reserve portfolio and complying with systemic oversight are all costly and operationally demanding. This suggests that only well-capitalized players – large banks, payment companies or major fintechs – are likely to operate at the “systemic” scale contemplated by the Bank of England’s rules, while smaller issuers might remain outside that perimeter under different, lighter regimes.
In the longer term, the interaction between regulated sterling stablecoins, tokenized deposits and any future central bank digital currency will be closely watched. If UK users come to view these instruments as broadly interchangeable in day-to-day use, competition may shift to user experience, integration with existing systems and fee structures rather than fundamental differences in safety. The central bank, meanwhile, will retain considerable control through its ability to set issuance caps, define reserve requirements and determine access to its own balance sheet.
For banks, the new rules are both a challenge and an opportunity. On one hand, they confirm that deposit substitutes – fully reserved digital tokens – are coming into the mainstream as regulated instruments. On the other, banks may themselves become major issuers or infrastructure providers for these stablecoins, turning a perceived competitive threat into a new business line, especially if tokenization of deposits and securities continues to expand.
Ultimately, the Bank of England’s decision to scrap individual holding caps while tightening the focus on total issuance reflects a pragmatic response to industry realities. It acknowledges that per-user limits are difficult to police in a fragmented, borderless digital ecosystem, but maintains a firm grip on the overall scale and risk profile of sterling stablecoins. The outcome is a framework that aims to anchor innovation firmly within the UK’s existing financial stability safeguards, rather than letting it evolve entirely at the edges of the regulated system.