The Bank of England has officially abandoned its controversial proposal to limit how much stablecoin individuals and consumers could hold, bowing to pressure from a U.K. House of Lords committee and the crypto industry. According to the Bank of England's statement on June 22, the central bank will no longer proceed with plans to cap individual holdings at £20,000 and corporate holdings at £10 million. Instead, the BOE is pivoting to a macro-level 'temporary issuance guardrail,' capping the total circulation of any single systemic stablecoin at £40 billion (approximately $52.9 billion). This represents a significant shift from the Bank of England's earlier proposals, which had included temporary limits that would have restricted individuals to holding no more than £20,000 of a single UK stablecoin during an initial adoption period, with corporate users facing limits of roughly $13.5 million. The change arrived Monday with a draft Code of Practice, easing rules that worried issuers while leaving Britain capping issuance of its own currency stablecoin, something neither the US nor the EU does. As per AMBCrypto, the decision marks a notable shift from proposals consulted on last year, with regulators now applying a temporary issuance guardrail to each systemic stablecoin, initially set at £40 billion, achieving the same policy objective while being easier to implement and allowing unrestricted use by households and businesses.
The revised framework permits issuers to hold up to 70% of reserve assets in short-term government debt, up from the 60% level proposed during earlier consultations. As reported by the Bank of England, the remaining 30% must be kept in non-interest-bearing deposits at the Bank of England. However, the bank has introduced important restrictions on how stablecoin issuers can utilize these reserves. While issuers can harvest yield from short-term U.K. government debt (T-bills) with maturities under six months, the BOE is strictly banning companies from paying interest or dividends directly to users for simply holding the stablecoin. The bank is explicitly permitting activity-based rewards, such as cash-back tokens or loyalty points linked directly to payment transactions via Web3 applications, while maintaining the 30% requirement for non-interest-bearing central bank deposits. The backing rule reaches into the gilt market, with the Treasury and Debt Management Office flagging sterling stablecoins as possible structural demand for Treasury bills, both planning new short-dated issuance to meet it. The change is intended to support more viable business models while maintaining resilience during periods of significant outflows.
The contrast abroad is sharp, with the US GENIUS Act, signed in July 2025, demanding full cash and Treasury reserves but capping no issuance, while Europe's MiCA stablecoin rules cap only foreign-currency coins used heavily for payments, placing no ceiling on euro stablecoins themselves. That leaves the UK alone in capping issuance of a coin in its own currency, fencing a market that barely exists in sterling. About 99% of stablecoins in circulation are dollar-denominated, the ECB reported in November. A ceiling on supply restrains the issuer, not the user, and even that softer form of stablecoin holding caps has no parallel among big economies. Coins used mainly for trading, such as Tether (USDT) and USD Coin (USDC), stay under the Financial Conduct Authority, with redemptions must clear within 24 hours of a complete request.
The Bank of England has set a clear timeline for the implementation of its new stablecoin framework, with the new framework clearing the runway for regulated stablecoins to officially go live in the U.K. in 2027 when the country's crypto rules are expected to come into effect. The central bank noted that the £40 billion issuance ceiling is designed to protect the broader U.K. credit system from sudden capital flight while allowing innovation, global competition and growth to take place. The BOE said it intends to scale back and eventually eliminate the guardrail entirely once the market stabilizes. Following a final feedback window closing in September 22, the new framework will enable the development of a competitive stablecoin market in the UK, with the £40 billion issuance ceiling representing a significant step toward supporting multiple forms of digital money operating alongside traditional bank deposits. The unresolved question is whether these coins can settle wholesale market trades, with the Bank saying the work continues. As per AMBCrypto, the final Code of Practice is expected by the end of 2026, following a consultation period that runs until September, with the Bank and the Financial Conduct Authority developing a coordinated framework that will allow firms to transition from non-systemic to systemic status as they grow.
The announcement forms part of a broader effort by UK authorities to establish a regulatory regime for systemic sterling stablecoins, with Sarah Breeden, Deputy Governor for Financial Stability, describing the framework as 'a major milestone' for innovation in UK payments. She added that the rules lay the foundations for trust in a new form of money through prompt redemption, strong protections, and central bank support. The guardrail will be reviewed periodically and removed once concerns around credit provision have been addressed. The move follows industry feedback and forms part of the UK's developing framework for digital money, with regulators signalling a more practical framework for stablecoins operating within the UK's financial system. The decision represents a significant step toward mainstream adoption of digital money in the UK, with the framework designed to support innovation while maintaining confidence in money and financial stability.
