Bank of England drops stablecoin holding caps in final UK rules

The Bank of England has removed proposed limits on individual stablecoin holdings and eased reserve requirements in its final policy and draft rules for systemic stablecoins.

Summary

• The Bank of England has dropped proposed individual stablecoin holding caps and set an initial £40 billion issuance limit per token.
• Stablecoin issuers can now hold up to 70% of reserves in short term government debt, up from the 60% level proposed in earlier consultations.
• Regulators revised the framework after industry concerns that ownership caps and reserve requirements could make sterling stablecoins difficult to scale.

The central bank said on Monday that it will no longer proceed with plans to cap how much of a sterling-backed stablecoin an individual can hold. Instead, the Bank of England will place a limit on the total amount of a stablecoin that can be issued, with an initial threshold of £40 billion ($52.8 billion).

The revised framework also permits issuers to hold up to 70% of reserve assets in short-term government debt, up from the 60% level proposed during earlier consultations. The remaining 30% must be kept in non-interest-bearing deposits at the Bank of England.

Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, said the measures establish protections for a new form of digital money while supporting innovation in payments.

“This is a major milestone in delivering greater choice and innovation in UK payments,” Breeden said. She added that the framework provides prompt redemption rights, safeguards for users and support from the central bank.

Industry concerns prompt policy revisions

The final rules follow months of discussions between regulators and industry participants over how sterling stablecoins should operate in the UK financial system.

In November 2025, the Bank of England proposed temporary limits that would have restricted individuals to holding no more than £20,000 of a single UK stablecoin during an initial adoption period. Corporate users would have faced limits of roughly $13.5 million.

Bank officials said at the time that the restrictions were designed to reduce the risk of large deposit outflows from commercial banks if stablecoins became widely used for payments.

The same consultation proposed that at least 40% of reserves backing a stablecoin be held in non-interest-bearing deposits at the central bank, while the remainder could be invested in short-term UK government debt.

Digital asset firms, legal advisers and prospective issuers argued that the ownership caps would be difficult to enforce across wallets and trading venues. Industry participants also told regulators that large non-interest-bearing reserve requirements could make sterling stablecoins less attractive to issue.

Breeden said in May that the central bank was reassessing both the holding limits and reserve structure after receiving feedback from market participants.

Stablecoins remain part of broader UK digital finance plans

The Bank of England has continued to position stablecoins as one component of a larger digital payments strategy that also includes tokenized bank deposits and a possible retail central bank digital currency.

During City Week 2026 in May, Breeden said the UK should support multiple forms of digital money operating alongside traditional bank deposits. She also disclosed that the central bank was considering restrictions on total issuance rather than individual ownership limits during the early stages of adoption.

The latest policy arrives as UK authorities advance several tokenization initiatives. The Bank of England and the Financial Conduct Authority recently sought feedback on rules for tokenized securities and market infrastructure, while the Bank-FCA Digital Securities Sandbox continues preparations for commercial launches from participating firms.

Stablecoins have grown rapidly in recent years as issuers promote them as a tool for faster and lower-cost payments, particularly for cross-border transactions.

The Bank of England has repeatedly cautioned that large-scale stablecoin adoption could move deposits away from commercial banks, a development that officials say could affect bank lending and borrowing costs. The final framework seeks to address those concerns while creating conditions for regulated sterling-backed stablecoins to operate in the UK market.