The Bank of England has backed away from one of its most contentious stablecoin proposals, abandoning a plan to limit how many digital pound tokens any individual could own. The central bank’s final policy framework, made public this week, instead introduces an aggregate issuance cap of £40 billion per systemic stablecoin while slightly softening reserve requirements. The shift marks a notable departure from the earlier consultation draft, which many industry participants argued would have crippled stablecoin use in the United Kingdom.
The change was captured in a market update summarizing the new rules. The original proposal to cap individual holdings drew sharp criticism from fintech firms, wallet providers, and on‑chain participants who feared it would fragment liquidity and push stablecoin activity offshore. Without a clear limit per person, businesses and users can adopt GBP stablecoins for payments and settlements without arbitrary ceilings, a design choice that mirrors the approach taken by the European Union under its Markets in Crypto‑Assets (MiCA) regulation.
A Pragmatic Pivot on Systemic Stablecoins
Instead of micromanaging how users hold tokens, the Prudential Regulation Authority (PRA) will now focus on the total size of each stablecoin. The proposed £40 billion ceiling per coin applies to those designated systemic—typically stablecoins that could disrupt core financial plumbing if they failed. For context, that figure sits well above the combined circulating supply of all sterling‑denominated stablecoins today, giving issuers headroom to grow while the central bank retains a macro‑prudential lever. The BoE also eased some of the previously tight rules on backing assets, though it stopped short of releasing the full reserve composition details in this draft.
The central bank aims to finalise the regime by the end of 2026, a timeline that aligns with the Financial Conduct Authority’s separate work on stablecoin conduct rules and the Treasury’s broader legislative push. That gives Parliament roughly two years to approve the necessary statutory instruments and for the PRA to build out its supervisory toolkit.
Cross‑Border Signals and Market Structure
The UK’s repositioning lands at a moment when global stablecoin regulation is fracturing along different models. In the US, a major crypto market structure bill is facing fierce last‑minute lobbying from banks who want to rewrite a compromise they had accepted. The contrast is stark: while Washington struggles to pass stablecoin legislation, London is moving toward an operational framework that tries to balance innovation with financial stability. That divergence could influence where global issuers choose to domicile their sterling‑pegged and multi‑currency stablecoins.
The policy also dovetails with a broader tokenization wave that is reshaping market infrastructure. Last week alone, real‑world assets on‑chain crossed the $20 billion mark, and institutional players like Ondo and JPMorgan conducted the first live settlement of tokenised US Treasuries. Stablecoins are the settlement layer for most of that activity; a ruleset that allows sizeable total issuance without hobbling user access is likely to be seen as a competitive advantage by platforms building on‑chain financial products.
What Remains Unanswered
Several critical uncertainties linger. The BoE’s draft rules do not yet spell out exactly how the £40 billion limit will be monitored in real time, whether it applies per issuer or per legal entity, and what happens if a stablecoin approaches the cap—will the central bank demand a reduction, or is the ceiling a trigger for additional supervisory scrutiny? Equally, the reserve asset flexibility granted in this draft could be tightened again before finalisation, especially if Parliament’s Treasury Committee decides to test the framework against stress scenarios in public hearings.
There is also the question of how the Bank of England will coordinate with the FCA’s conduct regime, which governs consumer protection, redemption rights, and wallet safeguards. A stablecoin operating under a liberalised PRA prudential scheme but a restrictive FCA conduct handbook could still struggle to attract users and liquidity. For now, market participants are likely to treat the framework as a constructive but incomplete signal, awaiting concrete rulebook language later this year.
The direction of travel, however, is clear: the UK is choosing to compete for digital money activity rather than wall it off. Removing the individual holding cap directly addresses a fear that stablecoins would become a regulated curiosity rather than a widely used payment instrument. Whether that bet pays off depends on execution details and the political appetite to finish the job in 2026.
