Bank of England Sets £40B Stablecoin Cap in New Draft Rules

The Bank of England has published its policy statement and draft Code of Practice for systemic stablecoins, marking the most significant step forward in the UK's stablecoin regulatory framework since the initial consultation in November 2025. The publication replaces the proposed per-user holding limits — which had been set at £20,000 for individuals and £10 million for businesses — with a single issuer-level cap of £40 billion per coin, equivalent to roughly $52.8 billion at current exchange rates.

The Bank defines systemic stablecoins as those widely used in payments that could pose risks to the UK's financial stability. HM Treasury retains responsibility for designating whether a given coin falls within the systemic regime, based on criteria set out in the Banking Act 2009. Non-systemic stablecoins, which currently account for the bulk of stablecoin activity and are mainly used for crypto trading, will remain under the Financial Conduct Authority's supervision rather than the Bank's.

Industry Pushback on Holding Limits Prompted the Switch to an Issuance Cap

The shift away from per-user limits was telegraphed in May, when Deputy Governor Sarah Breeden told a City Week conference audience that the November proposals had been "overly conservative" and that the Bank was actively rethinking the mechanics. The original holding caps had drawn sustained criticism from digital asset companies and the House of Lords Financial Services Regulation Committee, which argued the restrictions would make pound-backed stablecoins uncompetitive relative to dollar-backed rivals operating without equivalent limits in the US and EU.

Enforcing wallet-level caps was also flagged as operationally unworkable, since systemic stablecoin issuers typically do not maintain direct relationships with every end user on a given network. The Bank acknowledged those objections and concluded that an issuer-level guardrail achieves the same policy outcome — limiting rapid deposit outflows from the banking system into stablecoins — while being cheaper to implement and removing restrictions on how individuals and businesses can actually use the coins.

Reserve Rules Ease as Debt Allowance Rises to 70% and Staking Backstop Lands

The draft rules also loosen the reserve requirements that had been the second major source of industry objection. Systemic issuers will now be permitted to hold up to 70% of backing assets in short-term sterling-denominated UK government debt, up from the 60% ceiling proposed in November. The remaining 30% must sit as unremunerated deposits at the Bank of England, down from the 40% floor in the original proposal. Issuers transitioning from the FCA's non-systemic regime will initially benefit from an even more flexible arrangement, able to hold up to 95% in government debt as they scale their operations.

The Bank is also introducing a central bank liquidity backstop for systemic stablecoin issuers during periods of stress, a mechanism that would allow the Bank to provide emergency liquidity support if an issuer cannot monetise its backing assets through private markets. That backstop, absent from the November consultation, addresses one of the core risks of any stablecoin regime: the possibility of a sudden wave of redemptions that outpaces an issuer's ability to liquidate reserves quickly enough.

Final Rulebook Due by End of 2026 Ahead of Planned 2027 Market Launch

The draft Code of Practice is now open for consultation until 22 September 2026. The Bank intends to finalise the rulebook by the end of the year, creating a clear pathway for regulated stablecoins to begin operating under the framework in 2027. The FCA is running a parallel track, overseeing non-systemic stablecoins and operating a sandbox that has already admitted Revolut, Monee Financial Technologies, ReStabilise and VVTX as participants testing UK-issued stablecoin products. The two regulators have committed to publishing a joint document clarifying how their respective rules interact as a firm grows from non-systemic to systemic scale. For more on how tokenised financial infrastructure is developing alongside these regulatory frameworks, see our DTCC tokenisation explainer.

The global stablecoin market sits at around $322 billion, dominated overwhelmingly by US dollar-backed tokens from Tether and Circle. The Bank's stated concern is that if pound-backed stablecoins never achieve the regulatory clarity or commercial scale to compete, UK users and businesses will default to dollar alternatives by default — effectively dollarising parts of the UK's digital payments infrastructure. Monday's publication is the clearest signal yet that the Bank is trying to prevent that outcome, even if the £40 billion cap means the guardrail still stays on until the market proves it can handle greater scale without destabilising bank deposit funding.