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The Bank of England just blew up its own rulebook on stablecoins. Out goes the old individual holding limit — that £20,000 cap on personal balances and the £10 million business ceiling per coin — and in comes a single £40 billion aggregate cap on systemic stablecoin issuance. It’s a pretty big shift, and it changes what pound-backed stablecoins can actually be used for.
The old framework was kind of clunky. Anyone trying to use sterling stablecoins for anything beyond small retail payments ran straight into the wall of those per-user, per-business limits. Cross-border settlements? Collateral posting? Basically off the table at scale. By moving to an aggregate issuance cap instead, the Bank clears the runway for larger transactions without forcing issuers or their customers to constantly track individual balances. The £40 billion ceiling sits at the systemic level — meaning it kicks in for stablecoins the Bank classifies as posing broader financial risk — so most day-to-day issuers won’t hit it anytime soon. But the architecture matters. It’s a signal that the Bank is at least willing to let this market grow up a little.
Coinbase raised questions.
Katie Harries from Coinbase flagged concerns about how long this “temporary” cap stays in place and whether stablecoins will eventually be cleared for wholesale market settlements. No clarity on those two points yet, and that gap probably worries anyone trying to build serious infrastructure around pound-backed assets. The UK has been pitching itself as a tokenization hub, and without firm answers on the cap’s duration or wholesale use cases, that pitch gets harder to make.
Reserve Rules Get Easier for Issuers
The Bank also loosened the reserve requirements. Previously, issuers of systemic stablecoins had to park 40% of their backing assets in non-interest-bearing central bank deposits. That number drops to 30% under the new rules. It doesn’t sound massive, but for an issuer sitting on hundreds of millions in reserves, the ability to shift that extra 10% into interest-bearing assets — short-term gilts, for instance — makes the economics of running a pound-backed stablecoin look meaningfully better.
And the economics have needed help. Pound-backed stablecoins currently account for less than 0.5% of the global stablecoin market. Dollar-denominated stablecoins dominate — USDT and USDC together hold the vast majority of market share worldwide — so the UK is starting from a small base. Making issuance more financially attractive is probably the right move if the goal is to grow that number.
The Bank’s approach sits somewhere between the US and EU models. The US has focused on market growth with relatively flexible reserve rules, while the EU under MiCA has pushed hard on reserve quality and asset segregation. The UK seems to want both — innovation room and financial stability protection — which is a tricky line to walk.
Banks Face a Tougher Path Than Fintechs
Here’s where it gets complicated for traditional banks. The Bank of England isn’t letting them just bolt a stablecoin product onto their existing operations. Any bank wanting to issue a pound-backed stablecoin has to do it through a separate, insolvency-remote entity with distinct branding and its own governance structure. That’s not a small ask. Setting up a separate legal vehicle, running distinct compliance operations, building a brand that isn’t your main bank brand — it’s expensive and operationally messy.
So banks are probably sitting on their hands for now, weighing whether the market opportunity justifies that setup cost. Non-bank issuers and fintech companies don’t carry that same baggage. They can move faster under the current framework, and the rules around redemption and trust seem designed with them in mind. If banks take too long to figure out their structure, fintechs will own the early market.
The insolvency-remote requirement isn’t new — the Bank held firm on it through this round of changes. The concern is deposit outflows during stress events. If a bank-issued stablecoin sits inside the same legal entity as the bank itself, a run on the stablecoin could accelerate a run on the bank. Separate entities break that link, at least in theory.
The Bank wants these final rules locked in by the end of 2026. That’s the target, though “final rules by end of 2026” has been a moving goalpost in UK financial regulation before. Stakeholders — issuers, banks, fintech firms, payment processors — are basically in a holding pattern until then, trying to build compliant infrastructure against a framework that isn’t fully set.
What’s clear right now: the individual cap is gone, the aggregate cap is £40 billion, the reserve requirement dropped from 40% to 30%, and banks still need separate entities to play. Harries from Coinbase still wants answers on the cap timeline and wholesale settlements.
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Frequently Asked Questions
What did the Bank of England replace individual stablecoin holding limits with?
The Bank scrapped the previous £20,000 personal cap and £10 million business limit per coin, replacing them with a £40 billion aggregate issuance cap applied at the systemic stablecoin level.
How did the Bank of England change reserve requirements for stablecoin issuers?
The required share of backing assets held in non-interest-bearing central bank deposits dropped from 40% to 30%, letting issuers hold more reserves in interest-bearing assets like short-term gilts.
