Bank of England drops stablecoin holding limits as UK moves toward regulated digital money

The Bank of England has scrapped proposed holding limits for systemic stablecoins and unveiled draft rules that could pave the way for regulated sterling-backed stablecoins to operate as part of the UK’s financial infrastructure from 2027.

In a policy statement and draft Code of Practice published on June 22, the central bank confirmed it will replace previously proposed wallet-level limits with a temporary issuance guardrail of £40 billion per systemic stablecoin. 

The move follows industry feedback and forms part of the UK’s developing framework for digital money.

The Bank said the framework is designed to support innovation while maintaining confidence in money and financial stability.

BoE replaces holding limits with £40B issuance cap

The decision marks a notable shift from proposals consulted on last year.

Under the earlier framework, the Bank considered imposing holding limits on users and businesses to manage risks associated with large-scale stablecoin adoption. Instead, regulators will now apply a temporary issuance guardrail to each systemic stablecoin, initially set at £40 billion. 

The Bank said the approach achieves the same policy objective while being easier to implement and allowing unrestricted use by households and businesses.

The guardrail will be reviewed periodically and removed once concerns around credit provision have been addressed.

Reserve requirements eased after industry feedback

The Bank also revised its reserve framework for systemic stablecoin issuers.

Under the updated rules, issuers will be permitted to hold up to 70% of backing assets in short-term UK government debt. This is up from the 60% proposed during consultation. 

The remaining reserves must be held in deposits at the Bank of England to ensure issuers can meet redemption requests promptly.

The change is intended to support more viable business models while maintaining resilience during periods of significant outflows.

Stablecoins move closer to mainstream payments

The announcement forms part of a broader effort by UK authorities to establish a regulatory regime for systemic sterling stablecoins.

The Bank and the Financial Conduct Authority are developing a coordinated framework that will allow firms to transition from non-systemic to systemic status as they grow. 

The final Code of Practice is expected by the end of 2026, following a consultation period that runs until September.

Sarah Breeden, Deputy Governor for Financial Stability, described the framework as “a major milestone” for innovation in UK payments. She added that the rules lay the foundations for trust in a new form of money through prompt redemption, strong protections, and central bank support.

Final Summary

• The Bank of England has dropped proposed holding limits for systemic stablecoins and replaced them with a temporary £40 billion issuance guardrail.
• Regulators also eased reserve requirements, signalling a more practical framework for stablecoins operating within the UK’s financial system.