BoE Reconsiders £20,000 Stablecoin Cap, 40% Reserve Rule

The Bank of England is reassessing proposals that would cap individual stablecoin holdings at £20,000 and require issuers to keep 40% of reserve assets deposited at the central bank without earning interest. Officials opened the review after feedback from stablecoin issuers and payments firms.

Deputy Governor for Financial Stability Sarah Breeden indicated parts of the proposed implementation could create operational difficulties. Bank officials noted the reassessment responds to concerns that elements of the framework could reduce the UK’s attractiveness for building token-based payment systems.

Under the earlier plan, any reserve assets not held at the central bank would be invested in short-term UK government debt. The holding cap was framed as temporary and would limit an individual to up to £20,000 of a specific stablecoin.

Industry participants argued that requiring a large share of reserves to sit idle at the central bank would lower returns on backing assets. Stablecoin issuers typically earn income from interest and short-term government securities that back tokens. Lower reserve yields could reduce issuer margins and affect the economics of offering stablecoins in the UK market.

Market participants also raised concerns that a strict per-wallet holding limit could constrain consumer use if stablecoins are integrated into everyday payments and financial services. Firms warned that overly restrictive rules might shift activity to jurisdictions with more flexible reserve frameworks.

Bank staff had previously flagged risks linked to rapid stablecoin adoption, including operational failures and potential contagion to the banking system if reserves were mismanaged. The contested reserve and holding limits were proposed to reduce run risk and ensure clear backing of tokens.

The Bank has not published a final timetable for revisions. Officials say they will consider industry feedback and operational concerns, and they expect to issue updated guidance or proposals after completing the review and further consultations with market participants.