On June 22, the Bank of England (BoE) announced a policy and draft rules shifting from proposed limits on individual and corporate stablecoin holdings to a temporary issuance ceiling of £40 billion for each systemic stablecoin product in the UK. This change applies to stablecoins recognized as systemic by HM Treasury, aiming to make GBP-denominated payment products easier to operate while still limiting the risk of deposits leaving the banking system.
What Changes Under the Draft Rules
In its 2025 proposal, the BoE had considered imposing holding limits of £20,000 for individuals and £10 million for corporates. These limits never came into effect and will not be pursued further under the newly published policy statement and draft Code of Practice.
Accordingly, each systemic stablecoin product will be subject to an initial maximum issuance limit of £40 billion. This limit is calculated on the total circulating token supply of each individual product, not the overall market size, nor is it a blanket cap applied across an issuer with multiple stablecoins.
Under the draft rules, individuals and corporations will not face limits on the size, frequency, or type of stablecoin transactions, aside from constraints imposed by anti-money laundering, sanctions, and other existing laws. This mechanism eliminates the requirement to track real-time balance limits for individual users, which was one of the operational issues raised in consultation responses.
Why BoE Changed Course
The BoE stated that it dropped the proposed holding caps after consultation feedback raised concerns that the mechanism was complex, costly, and difficult to justify if only implemented during a transitional phase.
The central bank maintains its core concern regarding the rapid shift of bank deposits into stablecoins, which could impact bank liquidity and the capacity to extend credit to the economy. Therefore, the BoE shifted to capping the total issuance for each systemic stablecoin instead of monitoring the balances of individual consumers and corporates.
To set the £40 billion level, the BoE modeled a stress scenario, monitoring how many banks could fall below the 100% Liquidity Coverage Ratio threshold, the demand for central bank liquidity borrowing, and the likelihood of banks having to sell assets. The BoE stated that this ceiling provides a level of protection for credit supply equivalent to the old holding caps, but is easier to implement.
How the Draft Framework Works
The draft framework still requires systemic stablecoins to be backed 1:1. Under normal operating conditions, an issuer can hold a maximum of 70% of backing assets in short-term UK government debt securities with a remaining maturity of no more than six months; a minimum of 30% must be held as deposits at the BoE, and this portion will not earn interest. The BoE stated that this requirement reflects the design of stablecoins as a means of payment rather than a savings or investment product. For a stablecoin issued at the £40 billion limit, the 70/30 structure corresponds to a maximum of £28 billion in UK government debt securities and a minimum of £12 billion in deposits at the BoE.
Issuers must process redemption requests in real-time where possible, or complete them within 24 hours after receiving a fully valid request, completing AML/KYC checks, and receiving the tokens from the person requesting the exchange. Issuers are also prohibited from paying interest based on the duration a holder owns the stablecoin, though rewards tied to payment activities may still be permitted.
The BoE expects systemic issuers to directly access payment systems to support redemptions and interoperability with other forms of money. The central bank also plans to establish a Central Bank Liquidity Facility, allowing eligible issuers to borrow deposits from the BoE by pledging UK government debt securities as collateral; operational details will be published in 2027.
What the £40 Billion Cap Means
The £40 billion limit caps the volume of stablecoins issued and circulating, rather than the volume of payments users can make within a day. The BoE stated that this level is set at a scale sufficient for issuers to maintain a viable business model and serve major payment use cases; according to the authority, a stablecoin at that level could support daily transactions equivalent to major UK payment systems, where Faster Payments and card schemes process an average of around £1.4–£2.2 billion per day. The £40 billion level is also equivalent to approximately 10% of the average value processed daily by CHAPS.
This cap still creates a trade-off if demand grows faster than the volume of tokens an issuer is permitted to launch, as the price of the stablecoin on the secondary market could rise above par value. The BoE believes that such a scenario would require large and sustained capital flows, while committing to review the ceiling regularly and relax or remove it once risks to the credit supply are mitigated.
What Happens Next
Issuers of qualifying stablecoins will initially be subject to supervision by the FCA, the regulator responsible for issuance, custody, and admission to trading in the UK. Once a stablecoin is recognized as systemic by HM Treasury, the issuer will transition to a co-supervisory model, where the BoE takes charge of prudential risk and financial stability, while the FCA continues to oversee conduct and user protection.
The BoE said it will soon publish a joint document with the FCA regarding how firms transition between these two regimes. The draft Code of Practice is currently open for consultation until September 22, 2026, while the final rulebook is expected to be finalized by the end of the year.
Parallel to that process, the FCA has selected Monee Financial Technologies, ReStabilise, Revolut, and VVTX for the stablecoin sandbox. The trials include payments, wholesale settlement, and crypto trading, with results expected to contribute to shaping the final stablecoin rules in 2026.
