Bank of England drops holding limits, sets £40bn stablecoin cap

The Bank of England on June 22 removed earlier proposals for wallet-level holding limits on systemic stablecoins and published a policy statement and draft Code of Practice that introduce a temporary £40 billion issuance guardrail for each systemic coin. The documents outline how regulated sterling-backed stablecoins could operate within the UK payments system from 2027.

Under the draft framework, regulators will replace limits on individual user and business holdings with an issuance cap initially set at £40 billion per systemic stablecoin. The Bank said the cap will be kept under periodic review and may be lifted once concerns about credit provision have been addressed.

The Bank also revised reserve rules for systemic stablecoin issuers. Issuers may hold up to 70% of backing assets in short-term UK government debt, increased from a 60% threshold in the earlier consultation. The remainder of reserves must be held as deposits at the Bank of England so issuers can meet redemption requests promptly.

The draft Code and policy statement form part of a coordinated regime with the Financial Conduct Authority. The framework includes a pathway for firms to move from non-systemic to systemic status as they grow. Consultation on the draft Code runs until September, and the Bank expects to publish a final Code by the end of 2026.

Bank officials described the issuance-based approach as simpler to implement and said it allows households and businesses to use stablecoins without direct wallet restrictions while aiming to preserve confidence in money and financial stability.

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

The Bank will monitor market developments and may adjust the issuance guardrail and other requirements as market structure and risks evolve.