BoE Weighs Issuer Caps Over Per-User Stablecoin Limits

Bank of England officials are considering limits on the total amount of stablecoins a single issuer can put into circulation rather than strict caps on how much any one user may hold. Draft rules for the UK stablecoin framework are expected to be published next month.

The per-user limit was proposed to reduce the risk that household deposits would move rapidly into stablecoins during periods of stress. Industry groups and payments firms argued that per-user ceilings would prevent businesses and institutional treasuries from using stablecoins for large payments, cross-border transfers and corporate liquidity management, prompting regulators to examine issuer-level caps and aggregate issuance limits as alternatives.

A per-user limit would cap each customer’s balance. An issuer-level cap would put a ceiling on the total supply a single issuer may issue. An issuer cap would constrain an issuer’s market size and growth plans while leaving individual transaction sizes and balances unrestricted within that supply limit.

Regulatory officials are expected to decide whether aggregate issuance caps will replace per-user ceilings, and to set rules on reserve assets, redemption rights and authorization requirements. The draft will also address how UK rules will interact with the EU’s Markets in Crypto-Assets regulation and with evolving U.S. legislation.

Adopting issuer-focused limits would avoid a binary retail-versus-institutional regulatory split that a uniform per-user cap would require to exclude large institutional holders. Regulators have cited systemic risk to the banking deposit base as the reason for proposing per-user limits; aggregate issuance caps are being examined as an alternative way to limit systemic exposure at the issuer level.

Market participants will watch the draft for precise cap levels, the methodology for calibration, reserve-quality standards and transitional arrangements for existing stablecoins. The timing and detail in the draft next month will shape product roadmaps for firms planning UK operations.