Bank of England Drops Stablecoin Holding Caps, Sets £40 Billion Issuance Cap

A Major Win for UK Stablecoin Issuers

The Bank of England published its policy statement and draft Code of Practice for systemic sterling stablecoins on June 22, marking the biggest shift in UK digital-money policy this year. The headline change is the removal of the individual and corporate holding caps that the central bank floated in its November 2025 consultation, and their replacement with a £40 billion temporary issuance limit per issuer. The decision follows months of industry pushback, a critical House of Lords report, and UK fintech warnings that the original draft would push sterling activity offshore. The framework is open for feedback until September 22, 2026, with finalisation expected by year-end and live operation in 2027 (Bank of England).

From £20,000 Cap to Unlimited Holdings

The original November 2025 draft would have capped individual holdings of any single systemic sterling stablecoin at £20,000 and corporate holdings at £10 million. Industry groups warned the limits would make UK-issued tokens unworkable for treasury operations, settlement, and large e-commerce flows, and would steer activity toward dollar tokens issued under looser regimes elsewhere. Anyone holding sterling stablecoins as everyday digital cash would have hit the £20,000 ceiling on a single token long before filling a digital wallet with meaningful working capital. The Bank of England has now scrapped both ceilings entirely. Under the new rules, users and businesses can hold any amount of a recognised systemic sterling stablecoin, with stability instead enforced at the issuer level through the £40 billion cap. The Financial Times and other UK outlets called the revision a clear softening of the central bank’s earlier stance, reflecting the trade-off the Bank has chosen to make between adoption and deposit-flight risk (City AM).

How the £40 Billion Issuance Cap Works

A systemic stablecoin is one that the Bank of England judges to be widely used enough to matter to UK financial stability if it were to fail. Once an issuer is designated systemic, it must operate under the Bank’s Code of Practice, and its total tokens in circulation cannot exceed £40 billion. The cap is described as temporary and subject to regular review, with the Bank stating it would be lifted as credit-risk and operational-risk concerns ease. The mechanism replaces the per-user cap with a per-issuer cap, intended to limit the speed at which commercial bank deposits can be converted into stablecoins without restricting any one customer’s behaviour. For a beginner, the simplest framing is this: instead of telling shoppers how much digital cash they can hold, the central bank is telling each issuer how big it can grow.

Reserves: 30% at the Central Bank, 70% in Gilts

The safety floor under the new framework sits in the reserve rules. Every systemic sterling stablecoin issuer must hold at least 30% of its reserves on deposit at the Bank of England. The remaining 70% may be held in short-term UK government debt. No lower-grade or higher-yielding assets are permitted, removing the reserve composition that triggered USDC’s March 2023 wobble after Silicon Valley Bank failed. The structure is designed to give holders a near-bulletproof redemption guarantee on demand, and to keep the issuer’s income tied to instruments the Bank itself controls. Stablecoin issuers will earn yield on the gilt portion, but the central-bank deposit portion is non-yielding, which is the explicit price of operating under the regime.

BoE Officials Frame It as a Trust Foundation

Sarah Breeden, Deputy Governor for Financial Stability, framed the policy as a milestone for UK payments innovation rather than a concession. She said the rules deliver “greater choice and innovation in UK payments” and added that “innovation thrives on trust. And today we’ve set out the foundations of that trust for a new form of money, with prompt redemption, strong protections and central bank support.” Governor Andrew Bailey, speaking separately, warned of a coming clash with the United States over stablecoin standards, arguing that weaker redemption rules for dollar-backed tokens could push stress onto the UK during a crisis. The two statements set the Bank’s preferred frame: open the door at home, push for tougher rules abroad.

A Clash With the US Is Looming

Bailey’s warning lands at a moment when the dollar-stablecoin market is still operating under the lighter touch of the US GENIUS Act passed last year, which permits a broader range of reserve assets and does not impose central-bank deposit floors. The UK framework is now noticeably stricter on reserves but more permissive on holdings, while the US framework is the inverse. Analysts at major UK law firms suggest the divergence could matter for global issuers deciding where to base systemic operations, and for cross-border merchants picking the best crypto exchange to settle sterling and dollar tokens at scale. There is no immediate trigger for confrontation, but the Bank of England has clearly planted its flag before the gap widens further (American Banker).

What Happens Between Now and 2027

The Bank is accepting consultation feedback on the draft Code of Practice until September 22, 2026, after which it intends to finalise the rules by the end of the year. Recognised systemic stablecoin issuers can begin operating under the new regime during 2027. No issuer has yet been formally designated as systemic, and the Bank has signalled that designation will only happen once a token reaches a scale and usage pattern that meaningfully affects UK financial stability. Smaller sterling stablecoins continue to operate under the Financial Conduct Authority’s separate non-systemic regime. Anyone tracking the latest crypto news on UK regulation should treat September 22 as the next hard date.

A Defining Moment for Sterling in Digital Money

Sterling has rarely been the lead currency in any crypto story. The pound’s share of global stablecoin activity today is a rounding error next to the dollar, and the UK has spent much of the past two years watching the EU’s MiCA regime and the US GENIUS Act define the perimeter. The June 22 package changes that posture. By replacing a politically nervous cap with a structural one, the Bank of England has chosen to compete for systemic stablecoin business on terms it controls. Whether the framework produces a genuine sterling-denominated rail or simply a regulated annex inside a dollar-dominated market depends on whether issuers and users actually arrive in 2027. For now, the Bank has done the thing UK fintech has been asking for: it has written rules that someone could plausibly operate under. The question is who picks up the pen.