Bank of England Eases Stablecoin Rules and Scraps Individual Limits

The Bank of England (BoE) is changing course on stablecoin regulation. The central bank has published a final policy framework and draft rules for so-called systemic stablecoins, softening several earlier proposals from last year’s consultation. The most notable measure: the previously proposed limits on individual holdings of stablecoins have been removed.

Instead, the BoE introduces a total issuance cap per stablecoin, initially set at £40 billion. This framework applies to stablecoins designated as systemic, meaning they could significantly affect the UK’s payment system.

Why £40 billion as the limit?

According to the Bank of England, an issuance cap of £40 billion allows stablecoin companies to run profitable business models without endangering the stability of the financial system. The amount corresponds to the daily transaction volume of other large payment systems in the United Kingdom, such as Faster Payments and card payments, which process between £1.4 billion and £2.2 billion on average each day. Moreover, £40 billion represents roughly 10% of the average daily values settled through CHAPS.

The cap also enables stablecoins to be used as a means of payment within the Digital Securities Sandbox, where limits per asset class range from £4.4 billion to £28 billion. The BoE notes that the measure is temporary. The central bank intends to review the issuance cap regularly and ultimately expects to abandon it once the real-world impact of stablecoins is better understood and banks have adjusted their funding models.

Rules to be finalised by end of 2026

In addition to scrapping individual holding limits, the BoE is also easing requirements regarding the assets that may serve as reserve backing. This gives stablecoin issuers more flexibility in holding reserves, increasing the viability of their business models. The central bank aims to finalise the definitive rules by the end of 2026, according to the Bank of England.

The news comes at a time when the stablecoin market is in full flux. For instance, the msUSD stablecoin recently crashed by 85% after a verification contract was terminated, once again highlighting the risks of poorly regulated stablecoins. The UK approach, with a clear legal framework, therefore appears to be a deliberate choice to strengthen confidence in pound-pegged stablecoins.