Bank of England Introduces 40 Billion Pound Cap on Systemic Stablecoins

The Bank of England published draft rules for systemic stablecoins, replacing individual holding caps with a single 40 billion pound ($52.8 billion) issuance limit and easing reserve requirements. The framework targets tokens widely used in UK payments that carry potential risks to the country's financial stability.

What the BoE dropped from the previous proposal

The November 2025 consultation proposed individual holding caps. Retail users could hold up to 20,000 pounds in any single stablecoin, and businesses up to 10 million pounds. The idea was simple. Limit individual balances and you prevent large-scale deposit outflows from banks. The practical implications for issuers proved far more complicated.

Firms pointed out that running individual limits would require real-time monitoring of millions of wallets, instant blocking of incoming transfers when a user hit the cap, and a complex notification system. The compliance burden made a GBP stablecoin impractical for everyday payments. In May, BoE Deputy Governor Sarah Breeden confirmed the central bank was reconsidering the approach after widespread pushback from the digital asset sector.

The BoE agreed and switched to an aggregate issuance cap. Households and businesses can hold unlimited amounts as long as total issuance for one token stays below 40 billion pounds. The regulator noted the cap "will be reviewed regularly and removed once risks to credit provision have been addressed," without specifying a timeline.

Who falls under the cap and what "systemic" means

The BoE supervises only "systemic" stablecoins, meaning tokens widely deployed in payments that could destabilize the banking system. HM Treasury decides whether a specific stablecoin qualifies as systemic, not the central bank directly. Without that determination, a token stays under the Financial Conduct Authority (FCA) and faces neither the issuance cap nor BoE reserve requirements.

Stablecoins used mainly for crypto trading remain outside the systemic definition and continue under FCA rules. For the market, this matters. Most current USD stablecoins circulating in UK crypto carry no GBP liability and fall outside the new cap entirely.

The 40 billion pound threshold serves the same purpose as the cancelled individual limits. It shields bank deposits from a mass shift into stablecoins. The BoE points to DeFi's contraction as context - total value locked fell from roughly $164 billion before the October 2025 liquidation event to around $73 billion now. At this market scale, the regulator views the threshold as sufficient.

Higher bond allocation and what it means for issuer economics

Alongside the new cap structure, the BoE raised the permitted share of reserves held in yield-bearing government debt from 60% to 70%. The remaining reserves stay in liquid assets as before. At the Bank of England's current rate of 4.25% and an issuance ceiling of 40 billion pounds, the difference between 60% and 70% in bonds works out to roughly 170 million pounds in additional annual interest income for the sector as a whole.

Stablecoin business models rely heavily on this interest income rather than transaction fees. Tether generated $13 billion in profit in 2024 primarily from reserve yields. For GBP products, a higher bond allocation improves unit economics from day one. Global players considering GBP-backed offerings will find the math noticeably better under the revised rules.

Industry backed the changes, but key questions remain open

Katie Harries, Coinbase's head of policy for Europe, welcomed the shift from individual to aggregate limits and flagged two unanswered questions. First - what "temporary" actually means for the 40 billion pound cap and what the realistic review timeline looks like. If that remains open, potential issuers may delay market entry decisions. Second - whether stablecoins will be permitted for settlement in core wholesale markets.

"Without access to wholesale settlement, the UK's tokenization ambitions will not be delivered," she said in a statement. ClearBank CEO Mark Fairless backed dropping the individual caps but warned against overly restrictive backing asset rules.

"The endgame should be a truly risk-based framework rather than a one-size-fits-all approach, otherwise the UK is in danger of leaving sterling stablecoins at the starting line while other markets move ahead."

- Mark Fairless, CEO of ClearBank, statement released June 22, 2026

GBP stablecoins and global competition

Dollar-backed stablecoins dominate the global market. USDT and USDC face no equivalent issuance caps from their regulators. The EU's MiCA regulation caps daily transaction volumes for "significant" stablecoins above certain thresholds, but sets no ceiling on total issuance. The US GENIUS Act moving through Congress similarly contains no issuance limits. The UK's model stands apart from both.

For the first wave of GBP stablecoin issuers, the 40 billion pound threshold creates a natural scale ceiling during the early phase: a token that hits the cap cannot add new users until the limit is lifted. The BoE promises to revisit the threshold as banking sector credit risks ease, but that process runs on macroeconomic conditions, not stablecoin market demand. The BoE aims to finalize the rulebook by end of 2026. Regulated GBP stablecoins are scheduled to launch in 2027.