Bank of England’s Policy Shift on Stablecoins
In a significant policy shift, the Bank of England announced that it will no longer impose restrictions on the amount of sterling-backed stablecoins individuals can hold, as outlined in its latest draft regulations concerning systemic stablecoins. This update was communicated on Monday, marking an important step in the UK’s approach to digital currencies.
New Framework for Stablecoins
Instead of limiting individual holdings to a specified amount, the bank has decided to establish an overarching cap on the total issuance of these stablecoins, initially set at £40 billion, equivalent to approximately $52.8 billion. Furthermore, the revised framework allows stablecoin issuers to allocate up to 70% of their reserve assets in short-term government debt, an increase from the previous cap of 60% that was suggested in earlier discussions. The stipulation remains that at least 30% of reserves must be maintained in non-interest-bearing accounts at the Bank of England.
Importance of the New Measures
Sarah Breeden, who serves as the Deputy Governor for Financial Stability, emphasized the importance of these new measures in fostering a safe environment for innovative payment solutions while simultaneously protecting users.
“This represents a critical milestone in enhancing options and innovation in payments across the UK,”
she remarked. The framework aims to enable rapid redemption rights and offers comprehensive safeguards for all users, supported by the Bank of England itself.
Background and Industry Feedback
These final rules are the result of extensive dialogues involving regulators and industry stakeholders regarding the operational framework for sterling stablecoins within the UK financial system. As recent as November 2025, the Bank had proposed stricter limits, originally suggesting that individuals could only own up to £20,000 in any single UK stablecoin during the introductory phase, with corporations facing a maximum of around $13.5 million. Those measures were intended to mitigate the risk of significant withdrawals from commercial banks should stablecoins gain widespread acceptance for transactions.
Amid feedback from the sector, including digital asset firms and legal advisors, there were concerns that such ownership limits would be challenging to enforce across different wallets and trading platforms. Additionally, many in the industry voiced that high reserve requirements might diminish the appeal of issuing sterling-based stablecoins. In a reassessment announced in May, Breeden indicated that the Bank was considering concentrating on total issuance restrictions rather than individual ownership caps as the market evolves.
Broader Strategy and Future Initiatives
This development aligns with the broader strategy of the Bank of England to support various forms of digital currencies, including tokenized bank deposits and potentially a retail central bank digital currency (CBDC). During the City Week 2026 event in May, Breeden called for the coexistence of multiple digital money forms alongside traditional banks.
In tandem with these stablecoin regulations, UK authorities continue to advance tokenization initiatives, with the Bank of England and the Financial Conduct Authority (FCA) actively soliciting input on proposed rules surrounding tokenized securities and market infrastructure. Meanwhile, the Bank-FCA Digital Securities Sandbox is working towards facilitating commercial projects from involved firms.
Addressing Risks in the Financial Landscape
Despite the rapid expansion of stablecoins as instruments for efficiency in payments—especially for international transactions—the Bank of England has consistently warned about the potential risks involving deposit retraction from commercial banks that could subsequently impact borrowing and lending rates. This newly finalized framework aims to address these risks while fostering a regulatory environment for sterling-backed stablecoins to thrive in the UK’s financial landscape.
