Bank of England eases stablecoin rules with £40bn issuer cap for UK market

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BOE eases stablecoin rules

Highlights

Bank of England sets a temporary £40 billion issuance cap on UK systemic stablecoins, replacing stricter per-user limits proposed earlier.
BoE reduces required non-interest-bearing reserve asset share for stablecoin providers from 40 per cent to 30 per cent, easing liquidity constraints.
Revised stablecoin framework remains open for consultation until September 22, with final rules expected by year-end for 2025 market entry.

Revised framework for sterling stablecoins

As first reported by the Financial Times, the Bank of England said on Monday that it is replacing proposed holding caps on UK stablecoins with a "temporary issuance guardrail" that limits systemic stablecoins to no more than £40 billion in issuance. The central bank says the cap will be reviewed regularly and removed once risks to credit provision have been addressed.

The BoE had originally planned to limit individuals to owning up to £20,000 per coin and businesses to holding up to £10 million, aiming to prevent a large shift of deposits out of banks. It also says it is reducing the share of reserve assets that stablecoin providers must keep in non-interest-bearing central bank accounts from 40 per cent to 30 per cent.

Sarah Breeden, the BoE's deputy governor for financial stability, says the changes mark a major step toward broader choice and innovation in UK payments. She says the updated approach sets out the foundations of trust for a new form of money through prompt redemption, strong protections and central bank support.

Industry competitiveness and next steps

Crypto companies had criticized the earlier proposals as stricter than expected U.S. rules, arguing they would make pound-denominated stablecoins less attractive and leave the UK behind in the competition to become a digital assets hub. Breeden had already signaled in an interview last month that some elements of the BoE's earlier approach might be overly restrictive and that alternative ways of addressing risks were under consideration.

Stablecoins are digital tokens typically pegged one-for-one to fiat currencies such as the dollar, and U.S. dollar products dominate the $315 billion global market. Sterling-based stablecoins remain a small part of the sector, accounting for less than 0.5 per cent of the total at present.

The revised proposals remain open for feedback until September 22. The BoE says it will publish further details shortly alongside the Financial Conduct Authority and aims to finalize the rules by the end of the year so regulated stablecoins can begin operating next year.

Our earlier coverage of stablecoin run risk explained how these tokens are increasingly used as market infrastructure—collateral and settlement—rather than everyday payments, making confidence shocks potentially more systemic. We outlined how heavy redemption demands could force issuers to liquidate reserve assets quickly, amplifying stress in core markets and transmitting turmoil beyond crypto through concentrated sell-offs.

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