UK Eases Stablecoin Rules in Bid to Keep Digital Finance Onshore
The Bank of England has softened key elements of its proposed stablecoin framework, abandoning individual holding limits and relaxing reserve requirements as policymakers seek to balance financial stability with the UK's ambition to become a global hub for digital assets.
Summary:
- The Bank of England has dropped proposed individual stablecoin holding caps.
- Systemic stablecoins will face a £40 billion issuance threshold.
- Issuers will be allowed to hold up to 70% of reserves in short-term UK government debt.
- The remaining 30% must be held in non-interest-bearing Bank of England deposits.
The Bank of England’s decision to replace individual holding caps with a £40 billion systemic issuance threshold marks a significant transition from a retail-protection model to a macro-prudential oversight model.
By focusing on systemic issuance rather than individual wallet restrictions, the Bank acknowledges that the primary risk to financial stability is not retail usage, but the ‘run risk’ of systemic providers. This shift suggests that the BoE is increasingly comfortable with stablecoins as a utility for the broader economy, provided they are backed by high-quality, liquid assets that do not put excessive pressure on commercial bank liquidity.
The revised framework, published on June 22, marks a notable shift from earlier proposals that drew criticism from industry participants who argued the rules risked making regulated sterling stablecoins commercially unviable.
Bank of England Relaxes Earlier Restrictions
The most significant change is the removal of proposed limits on how much stablecoin an individual user could hold.
Under earlier consultations, policymakers considered capping individual holdings to reduce risks associated with large-scale shifts from commercial bank deposits into digital money. Industry groups argued the proposal would severely limit adoption and place UK-regulated stablecoins at a disadvantage compared with overseas competitors.
The Bank has now opted for a system-wide approach focused on monitoring aggregate market growth and financial stability risks rather than restricting individual users.
The decision is widely viewed as a concession to industry concerns that the original framework was overly restrictive and could discourage innovation within the UK.
New £40 Billion Growth Threshold
While individual caps have been removed, regulators introduced a temporary issuance guardrail for systemic stablecoins.
Under the proposal, stablecoins deemed systemically important would face a £40 billion issuance threshold designed to limit excessive growth before the market structure and regulatory framework mature further.
READ MORE: Fidelity Joins Battle for Stablecoin Reserve Market
The measure reflects the Bank’s broader objective of supporting innovation while preventing any single private digital currency from becoming large enough to threaten financial stability.
Officials emphasized that the threshold is intended as a transitional safeguard rather than a permanent cap on industry growth.
Reserve Rules Become More Commercially Viable
The Bank also adjusted reserve requirements that had previously been criticized as economically burdensome.
Systemic stablecoin issuers will now be permitted to invest up to 70% of reserve assets in short-term UK government securities, while the remaining 30% must be maintained in non-interest-bearing deposits at the Bank of England.
The change is significant because government debt generates yield, providing issuers with a potential revenue source while preserving liquidity and redemption capacity.
Earlier proposals requiring substantially larger allocations to central bank deposits had raised concerns that regulated stablecoins would struggle to compete with international rivals operating under more flexible frameworks.
UK Seeks Middle Ground on Digital Assets
The revised framework highlights the UK’s evolving approach to digital asset regulation.
Rather than pursuing either a permissive or highly restrictive model, policymakers appear increasingly focused on creating a framework that supports innovation while maintaining oversight of systemic risks.
The Bank of England will supervise stablecoins considered systemically important, while the Financial Conduct Authority will continue overseeing non-systemic stablecoins and broader cryptoasset activities.
The draft code remains open for consultation until September 22, with final rules expected before year-end.
| Feature | Original Proposal (2025) | Updated Framework (2026) |
|---|---|---|
| Individual Limit | Capped (~£20k) | Removed |
| Issuance Cap | N/A | £40 Billion (Systemic) |
| Reserve Assets | Heavily BoE Deposits | 70% Govt Debt / 30% BoE Deposits |
| Focus | Retail Restriction | Systemic Stability |
Competition for Stablecoin Leadership Intensifies
The policy shift comes as major jurisdictions compete to establish themselves as centers for regulated digital asset activity.
The United States recently advanced implementation of the GENIUS Act, while the European Union continues rolling out its Markets in Crypto-Assets (MiCA) framework. Against that backdrop, UK policymakers face growing pressure to ensure domestic regulation remains competitive.
By removing user-level restrictions and improving reserve economics, the Bank of England has signaled a willingness to adapt its approach in response to market feedback.
For stablecoin issuers, the message is increasingly clear: regulated sterling-backed stablecoins will be permitted to operate at scale in the UK, provided they meet the Bank’s standards for liquidity, redemption and financial stability.
The revisions represent one of the strongest indications yet that the UK intends to support the development of a regulated stablecoin market rather than constrain it.
The information presented in this article is intended for informational purposes only and should not be interpreted as financial, investment, or trading advice. Coinspress.com does not promote or advocate for any particular investment strategy, asset, or cryptocurrency project. Cryptocurrency markets are highly volatile and unpredictable – always perform your own research and seek guidance from a qualified financial professional before making any investment decisions.
Kosta Gushterov
Reporter at CoinsPress
Kosta has reported on cryptocurrency markets and blockchain infrastructure since 2020, bringing over six years of hands-on experience in the crypto industry built through daily tracking of markets, trends, and emerging blockchain developments. Specializing in Bitcoin on-chain analysis, institutional ETF flows, and digital asset price action, his work has been cited by other news agencies and consistently covers market developments with a focus on data-driven reporting across Bitcoin, Ethereum, Solana, and XRP. Over the years, Kosta has contributed to multiple crypto media outlets in different regions, authoring over 6,000 articles across the sector. His reporting spans cryptocurrency markets and the broader fintech industry, tracking not only price action but also the technological and regulatory forces shaping the ecosystem. To support his analysis, Kosta actively leverages on-chain data and metrics from leading platforms such as Santiment, Glassnode, and CryptoQuant, enabling deeper, evidence-based market insights. He believes in the power of transparency and the data that underpins the blockchain ecosystem. His academic background in Marketing Management from Denmark further complements his analytical approach, adding a strong understanding of communication strategy and content positioning to his work.
