The Bank of England has relaxed key parts of its proposed framework for systemic sterling-denominated stablecoins, dropping individual holding limits and replacing them with a £40 billion cap per issuer. The revised approach shifts the regime from user-level restrictions toward macroprudential control of stablecoin supply.
Regulators framed the changes as a way to manage systemic risk while preserving the commercial viability of sterling-backed digital tokens. The recalibration follows concerns from market participants and parliamentarians that overly restrictive rules could push stablecoin activity offshore.
Holding Limits Give Way to Issuer-Level Controls
The updated package abandons proposed temporary ownership limits of £20,000 for individuals and £10 million for businesses. Instead, the Bank would impose a £40 billion issuance ceiling on each systemic stablecoin issuer.
That change materially alters the regulatory balance. Rather than restricting how much users and companies can hold, the Bank is targeting the concentration risk created by very large individual issuers.
The reserve framework has also been revised. Systemic stablecoin issuers would need to hold at least 30% of reserves in unremunerated central bank deposits, while up to 70% could sit in interest-bearing, short-term sterling UK government debt, creating a mixed reserve model built around liquidity and yield.
The shift is important for issuer economics. Earlier proposals contemplated larger government-debt allocations or stricter reserve splits, but the new 70% allowance for interest-bearing assets reduces the carrying cost of backing sterling stablecoins.
At the same time, the 30% central bank deposit floor preserves a liquidity buffer. That requirement is designed to support traceability, redemption confidence and supervisory visibility during stress conditions.
Consultation Sets the Path to 2027 Launches
The Bank is running a public consultation on the revised framework, with feedback due by September 22, 2026. Final rules are expected by the end of 2026, putting regulated UK sterling stablecoins on a potential path to operation from 2027.
The Financial Conduct Authority will open applications for stablecoin issuance and cryptoasset custody between September 30, 2026, and February 28, 2027. Those dates give firms a defined regulatory window to prepare licensing and custody plans.
The timetable remains subject to consultation. Stakeholders and industry groups can still influence technical details before finalization, meaning reserve mechanics, reporting duties and operational standards could still change.
For issuers, the revised model improves potential revenue by allowing a meaningful portion of reserves to earn returns in short-term UK government debt. For supervisors, the central bank deposit floor and issuer cap create clear metrics for stress testing and systemic oversight.
The broader policy signal is pragmatic. The Bank appears to be responding to competitiveness concerns without abandoning prudential safeguards, using issuer-level caps and reserve-quality rules as the core compromise.
Market participants should now watch for the final code of practice later this year. Firms planning issuance or custody services will need to align reserve management, liquidity planning and governance structures with the forthcoming Bank of England rules and the FCA application process.
