Bank of England Drops Stablecoin Holding Caps in Major Policy Shift

• BoE replaces stablecoin holding caps with a £40B issuance limit framework.
• Stablecoin issuers can now hold 70% of reserves in UK government debt.
• New rules aim to balance digital payment innovation with financial stability.

The Bank of England has unveiled a revised regulatory framework for systemic stablecoins, removing proposed limits on individual holdings and easing reserve requirements. The move marks a significant shift in the UK’s approach to digital asset regulation as authorities seek to support innovation while maintaining financial stability.

Bank of England Replaces Holding Caps With Issuance Limits

The Bank of England has abandoned plans to impose limits on how much sterling-backed stablecoins individuals and businesses can hold. Instead, regulators will apply a total issuance cap of £40 billion per systemic stablecoin.

The change follows feedback from industry participants who argued that ownership limits would be difficult to enforce across wallets, exchanges, and payment platforms. Earlier proposals suggested restricting individual holdings to £20,000 during the initial adoption phase.

Under the updated framework, users will be free to hold and transact with stablecoins without specific ownership restrictions. Regulators believe an issuance-based approach offers greater flexibility while still addressing risks linked to large-scale adoption.

The central bank stated that the £40 billion threshold is intended as an initial safeguard and may be reviewed as the market develops. Officials remain concerned that widespread stablecoin use could shift deposits away from commercial banks and affect lending activity across the financial system.

Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, described the framework as an important step toward expanding digital payment options while preserving trust and consumer protections.

Reserve Rules Relaxed to Support Market Growth

The final framework also introduces more flexible reserve requirements for stablecoin issuers. Companies will now be allowed to hold up to 70% of reserve assets in short-term UK government debt, compared with the 60% limit proposed during earlier consultations.

The remaining 30% of reserves must be maintained as non-interest-bearing deposits at the Bank of England. Regulators said the adjustment reflects industry concerns about the commercial viability of sterling stablecoins under stricter reserve structures.

The framework continues to require full asset backing and prompt redemption rights for users. Stablecoin issuers designated as systemic will also gain access to central bank liquidity facilities during periods of market stress.

The policy forms part of the UK’s broader digital finance strategy, which includes tokenized assets, digital payments infrastructure, and potential central bank digital currency initiatives. The Bank of England expects stablecoins to play a growing role in payments, settlements, and cross-border transactions as adoption expands.

Regulators aim to finalize the remaining rules and implementation measures by the end of 2026, providing greater clarity for stablecoin issuers seeking to operate within the UK market.

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