The Bank of England has softened its stablecoin proposal after industry pushback, replacing user holding limits with a temporary £40 billion cap on the issuance of each systemic sterling-backed stablecoin.
- Holding caps dropped, no fixed limits on how much users or businesses can own.
- Issuance cap introduced, a temporary £40 billion ceiling per systemic sterling stablecoin.
- Reserve rules eased slightly, issuers can hold more in short-term UK government bonds.
- Stablecoins are being treated as infrastructure, not just another speculative crypto token.
This is a meaningful shift. The Bank of England is still worried about systemic risk, but it has moved away from the clumsy idea of telling people and businesses how much sterling-backed stablecoin they can hold. That original approach was always going to be hard to square with real-world payments, treasury operations, and settlement use cases.
To be clear, this is about private sterling-denominated stablecoins, not a central bank digital currency or some official “digital pound.” A stablecoin is a crypto asset designed to hold a steady value, usually by being backed by cash or other reserves. A systemic stablecoin is one large or important enough that trouble with it could spill into the wider financial system.
Last year’s proposal would have capped individuals at £20, 000 and businesses at £10 million. That kind of rule may sound tidy in a policy memo, but in practice it creates friction, compliance headaches, and workarounds. For payments infrastructure, that is a mess. The new approach is simpler: cap the total issuance of the token instead of micromanaging every wallet that touches it.
That distinction matters. An issuance cap limits how much of a stablecoin can exist overall. A holding cap limits how much any one person or company can own. One is a system-level brake. The other is a hand on the shoulder that says: not so fast, mate.
The Bank of England said the change reflects feedback from industry participants. That fits the broader direction of travel in crypto markets, where stablecoins are increasingly used for payments, trading settlement, and cross-border transfers rather than treated purely as speculative tokens. Renna Ba, Head of Ecosystem at Morph, summed up that shift plainly:
“It is evident that increasingly, people aren’t looking at stablecoins as crypto tokens. They are looking at them as a more efficient way to move value, particularly across borders where traditional payment systems can still be slow, expensive and fragmented.”
“And so, clear rules represent not only legitimacy, they also clarify the way forward for retail users, business communities and financial institutions.”
That view is not hype for hype’s sake. Stablecoins do solve a real problem: moving value quickly across borders without relying entirely on the old banking rails, which can be slow, expensive, and fragmented. For crypto markets, they are also the grease that keeps trading and settlement from seizing up every time volatility spikes.
But there is a reason regulators keep circling back to stablecoins like suspicious hawks. They are private liabilities, not bank deposits. If people rush to redeem them during stress, the backing assets need to be liquid enough to meet withdrawals without triggering a fire sale.
That is where reserve rules come in. The updated framework reportedly allows issuers to hold up to 70% of reserves in short-term UK government bonds, up from a previously proposed 60% limit. The rest would be kept in non-interest-bearing accounts at the Bank of England, according to the revised plan. The point is to make sure issuers can meet redemption demands quickly if confidence starts to wobble.
Stablecoins must also be redeemable at face value within 24 hours. That is the basic promise behind the whole model: one token should equal one pound, not “one pound unless the market gets funny.”
That said, stablecoins are not covered by the UK’s deposit protection scheme. That distinction matters. If a bank deposit is protected and a stablecoin is not, users should not mistake a token that acts like money for money that carries the same safety net. Cash-like is not the same as cash. Fine print has a nasty habit of showing up right when people least want it to.
The crypto industry has largely welcomed the softer stance, but not everyone is cheering with both hands in the air. Some market participants still argue that the reserve requirements remain too restrictive. That criticism is fair enough. The BoE has eased up, but it has not rolled out a red carpet.
That tension is the real story here. Regulators want stablecoins to be safe enough to scale without becoming a liquidity headache. Issuers want enough room to operate efficiently and, ideally, not have every useful reserve asset treated like contraband. Those goals are not always compatible.
The new framework suggests the BoE is trying to split the difference. It has backed away from the most adoption-hostile part of its earlier proposal, but it is still keeping a firm grip on reserve quality and redemption discipline. The £40 billion cap is temporary, which signals that the central bank wants to see how these instruments behave before giving them more room to grow.
That cap may sound huge, and for now it is. But the number is less important than the principle. The Bank of England is acknowledging that some stablecoins could become systemically important, meaning their failure could affect broader markets. Once that happens, regulators are no longer dealing with a niche crypto product. They are dealing with payment infrastructure.
That is why the change matters for GBP-backed stablecoins in particular. If the framework holds, sterling stablecoins could become more useful for payments, treasury management, and cross-border transfers. That would be a genuine step forward for UK-based crypto firms and a small but meaningful win for anyone tired of watching Britain smother useful financial innovation with paperwork and caution tape.
Still, this is not a free pass. The BoE has not embraced permissionless growth. It has softened the edges of its plan while keeping the hard limits in place. In plain English: more workable, yes. Wild west, no.
There are also still important details to pin down, including how the £40 billion cap will be applied, what exactly qualifies a stablecoin as systemic, and whether the reserve mix will change again before the framework is finalized. The direction is clear, though. The Bank of England is no longer treating sterling stablecoins like a weird sideshow. It is treating them as money-adjacent infrastructure that could actually matter.
Key takeaways
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Why did the Bank of England change the plan?
Industry feedback pushed the BoE away from holding caps, which were too blunt for real-world use. An issuance cap is a cleaner way to control systemic risk without making ordinary use awkward. -
What changed for users and businesses?
The proposed limits on how much stablecoin individuals and companies could hold were removed. That makes sterling stablecoins more practical for payments, settlement, and treasury use. -
What is the £40 billion cap?
It is a temporary cap on the total issuance of each systemic sterling-backed stablecoin. The BoE is capping the size of the token itself, not every wallet that uses it. -
Are stablecoins treated like bank deposits in the UK?
No. They are not covered by the UK’s deposit protection scheme, so users do not get the same protection they would have with insured bank money. -
Is this a win for crypto?
Yes, but only partially. The rules are more usable than the original proposal, yet the BoE is still keeping a tight grip on reserves and systemic risk. It is a step toward adoption, not a surrender.
The biggest unresolved questions are still practical ones: how the cap will be enforced, whether it applies per issuer or per token, how strict the reserve rules will remain, and what “systemic” means in the BoE’s final framework. Those details will determine whether sterling stablecoins become useful financial plumbing or just another regulated experiment with a nice press release.
Further reading
A few useful references on the BoE’s stablecoin framework and the pushback around it:
- EXCLUSIVE: Inside the Industry Pushback That Forced Bank of England to Rework Stablecoin Rules
- Bank of England final framework for sterling-denominated systemic stablecoins
- Bank of England consultation on a regulatory regime for sterling-denominated systemic stablecoins
- Paul Hastings: Bank of England Consults on Systemic Stablecoins
- Financial Times: Bank of England dilutes stablecoin rules with plan for £40bn cap
