In its final policy and draft rules released on Monday, the central bank dropped earlier plans to impose limits on individual holdings of stablecoins. Instead, it will focus on restricting total issuance per stablecoin, with an initial cap set at £40 billion ($52.8 billion).
The move comes after significant industry concern that strict holding limits could stifle the growth of sterling-backed digital assets and discourage adoption among consumers and businesses.
The BoE also adjusted its stance on reserve backing requirements. Under the revised framework, stablecoin issuers will now be allowed to hold up to 70% of backing assets in short-term government debt, up from the previously proposed 60%. The remaining reserves must be held in non-interest-bearing deposits at the central bank, reinforcing liquidity and redemption guarantees.
Deputy Governor for Financial Stability Sarah Breeden described the changes as a foundational step in shaping the future of digital money in the UK.
“This is a major milestone in delivering greater choice and innovation in UK payments,” she said. “Innovation thrives on trust. And today we’ve set out the foundations of that trust for a new form of money - with prompt redemption, strong protections and central bank support.”
Stablecoins are digital assets designed to maintain a stable value, typically pegged to traditional currencies such as the pound or dollar. Their use has expanded rapidly in recent years, particularly in cross-border payments, where they are often promoted as a faster and cheaper alternative to traditional banking systems.
However, regulators remain cautious about their broader impact on the financial system. The Bank of England has repeatedly warned that widespread adoption could divert deposits away from commercial banks, potentially affecting lending capacity and raising the cost of credit in the wider economy.
The updated framework reflects the central bank’s attempt to strike a balance between encouraging financial innovation and preventing systemic risks, as governments and regulators worldwide continue to grapple with how best to oversee the growing stablecoin sector.