Bank of England eases stablecoin rules with £40 billion issuance cap

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Bank of England stablecoin cap

Highlights

Bank of England replaces proposed £20,000 retail and £10 million corporate stablecoin limits with a temporary £40 billion issuance cap per systemic stablecoin.
The central bank lowers mandatory non-interest-bearing central bank deposit reserves for issuers to 30%, allowing up to 70% of reserves in short-term UK government debt.
Framework removes restrictions on user stablecoin transactions and targets 2027 for regulated stablecoin launch, following industry pressure and further consultation until September.

Revised framework for systemic stablecoins

As reported by the Bank of England in a statement on Monday, the central bank abandons plans for a £20,000 retail holding limit and a £10 million corporate limit for stablecoins. It replaces those restrictions with a temporary macro-level guardrail that caps the total issuance of any single systemic stablecoin at £40 billion, or about $50.6 billion.

The Bank of England also cuts to 30% the share of reserves that issuers must hold in non-interest-bearing central bank deposits. That change allows firms to place up to 70% of reserves into short-term UK government debt with maturities of less than six months, improving potential returns for issuers while maintaining backing requirements.

The central bank still bans issuers from paying interest or dividends directly to stablecoin holders. It does, however, allow transaction-linked rewards such as cash-back tokens or loyalty points tied to payments through Web3 applications.

Industry pressure and market implications

The policy reversal follows pushback from the crypto industry and from the Financial Services Regulation Committee in the House of Lords, which earlier in June warns that the original limits could damage the business viability of stablecoin issuers. The Bank of England says feedback received during its consultation, which ends earlier this month, raises concerns about competitiveness and the sustainability of issuer business models.

Under the revised approach, users and businesses no longer face restrictions on the amount, frequency or type of stablecoin transactions they can make. The bank says the issuance cap is meant to protect the wider UK credit system from sudden capital flight while still allowing innovation and competition to develop.

The Bank of England says it expects to scale back and eventually remove the guardrail as the market matures. After a final feedback window closes in September, the framework is set to support the launch of regulated stablecoins in the UK in 2027, when broader national crypto rules are expected to take effect.

In our earlier article on the Bank of England’s revised safeguards for sterling stablecoins, we explained how the central bank shifted from proposed per-user holding limits to a temporary £40 billion issuance cap for any single systemic stablecoin. We also noted the updated reserve approach, cutting the required share held in non-interest-bearing central bank deposits and extending the consultation timeline toward finalized rules.

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