The Bank of England reversed course on its stablecoin regulations today, dropping plans to cap how much any individual or business can hold and replacing those limits with a temporary ceiling on total issuance. Under the revised framework, each "systemic" stablecoin - those large enough to pose financial stability risks - can have up to 40 billion pounds (roughly $50-53 billion) in circulation at any given time.
The original proposal would have limited individuals to holding no more than 20,000 pounds in any single stablecoin, with businesses capped at 10 million pounds. Industry groups and the House of Lords Economic Affairs Committee pushed back hard, arguing those limits would make stablecoins effectively unusable for institutional settlement and cross-border payments. The Bank listened, though it kept other restrictions in place, including a ban on paying interest to coin holders.
The revised rules also changed the reserve structure. Stablecoin issuers will now need to hold only 30% of their backing reserves in non-interest-bearing deposits at the Bank of England, down from earlier proposals that would have required a significantly larger share. The remaining 70% can be invested in short-term UK government debt, which gives issuers a path to profitability while maintaining liquid, low-risk backing.
What changed in the revised proposal
The Bank of England published its revised stablecoin discussion paper today, June 22, 2026, replacing key provisions from its earlier framework with a fundamentally different approach.
The most significant change is structural. The original proposal tried to limit risk at the user level - telling individuals they could hold a maximum of 20,000 pounds in any single stablecoin, and businesses no more than 10 million pounds. Those limits were designed to prevent deposit flight from the banking system into stablecoins, but critics pointed out they would make stablecoins impractical for the institutional and commercial use cases that drive most of the global stablecoin volume.
The replacement is a system-level cap. Instead of restricting individual holdings, the Bank will limit total issuance for any stablecoin that meets the "systemic" threshold to 40 billion pounds, roughly $50-53 billion at current exchange rates. That's a temporary measure meant to contain systemic risk while the UK develops its broader crypto regulatory framework.
On reserves, the change is equally significant. The revised rules require issuers to keep 30% of their backing in non-interest-bearing deposits at the Bank of England. The other 70% can go into short-term UK government bonds (gilts). This is a meaningful concession. Earlier proposals would have required a much larger share in central bank deposits, which pay nothing and would have made large-scale stablecoin issuance economically unworkable in the UK.
Why it matters for stablecoin issuers
The 40 billion pound cap is high enough to accommodate most existing stablecoins without immediately binding. Tether's USDT has roughly $140 billion in circulation globally, but its UK-specific issuance would be a fraction of that. Circle's USDC sits around $50 billion total. A UK-regulated stablecoin would need to reach massive scale before hitting the ceiling, which gives the market room to develop.
The 70% gilt allocation is where the economics become interesting. Short-term UK government debt currently yields in the range of 4-5%. On a stablecoin with 40 billion pounds in circulation, 70% invested at those rates would generate roughly 1.1 to 1.4 billion pounds in annual revenue for the issuer. That's a real business model, and it's similar to how Tether and Circle already generate revenue from their reserve portfolios in the United States.
The Bank of International Settlements flagged a related concern on June 1, publishing research on "stablecoin dollarization" - the risk that dollar-denominated stablecoins could displace domestic currencies in smaller economies. The UK's framework appears designed to encourage pound-denominated stablecoin issuance by making the economics workable, which could help maintain sterling's relevance in digital payments.
The reversal also matters because of who drove it. The House of Lords Economic Affairs Committee publicly questioned whether the original holding limits were workable, and industry lobbying was intense. The Bank's willingness to change course based on that feedback signals a regulatory environment that is attempting to balance stability concerns with market competitiveness - a contrast to the Bank's historically conservative posture on crypto.
How UK stablecoin rules compare to the US and EU
Three major regulatory frameworks for stablecoins are now taking shape simultaneously. The US passed the GENIUS Act, the EU's MiCA regulation is live, and the UK just released its revised framework. Each takes a different approach to the same set of problems: reserve quality, systemic risk, and consumer protection.
| Feature | US (GENIUS Act) | EU (MiCA) | UK (BoE Revised) |
|---|---|---|---|
| Holding limits | None | None for e-money tokens; limits on non-euro stablecoins (200M daily tx volume) | None (scrapped) |
| Issuance cap | None specified | No hard cap; ECB can restrict "significant" tokens | 40B pounds (~$50-53B) per systemic coin |
| Reserve requirements | 1:1 in cash, T-bills, or equivalent | At least 30% in bank deposits for significant tokens | 30% BoE deposits + 70% short-term gilts |
| Interest to holders | Banned under GENIUS Act | Banned for e-money tokens | Banned |
| Issuer licensing | Federal or state banking charter | E-money institution or credit institution license | BoE authorization for systemic issuers |
| Status | Signed into law 2025 | Live since June 2024 | Comment period through Sept 22, 2026 |
| Foreign stablecoin use | Permitted with registration | Restricted for non-euro tokens above volume thresholds | TBD - full rules expected 2027 |
The key difference is that the UK is the only jurisdiction imposing a hard issuance cap. The US and EU rely on reserve quality and supervisory oversight to manage systemic risk, while the UK is adding a quantitative limit on top of those controls. Whether the 40 billion pound ceiling survives the comment period remains to be seen - if the cap is too low for a major issuer to operate competitively, expect further lobbying to raise it.
All three jurisdictions agree on banning interest payments to stablecoin holders. That's a deliberate choice to keep stablecoins classified as payment instruments rather than deposit products, which keeps them outside the traditional banking regulatory perimeter while preventing them from directly competing with bank deposits for yield-seeking capital.
What's still restricted
The reversal on holding limits doesn't mean the UK is adopting a light-touch approach. Several significant restrictions remain in the revised framework.
The interest ban is the most commercially impactful. Stablecoin issuers earn yield on the reserves backing their coins - whether through Bank of England deposits (which pay nothing in this case) or gilt investments (which do pay yield). Under the current rules, issuers must keep all of that yield. They cannot share it with the people holding their stablecoins. That means UK-regulated stablecoins will function as non-interest-bearing payment instruments, similar to cash or prepaid cards, not savings products.
The 30% central bank deposit requirement also constrains issuers. That capital earns zero interest, which means roughly a third of every pound backing a stablecoin generates no revenue. On a hypothetical 40 billion pound stablecoin, that's 12 billion pounds sitting in a non-interest-bearing account. The opportunity cost at current gilt yields would be somewhere around 500-600 million pounds per year.
The "systemic" designation itself creates uncertainty. The Bank of England hasn't fully defined the threshold at which a stablecoin becomes systemic and triggers the 40 billion pound cap and the more intensive supervisory regime. That designation will likely depend on total issuance, transaction volume, and interconnectedness with the broader financial system, but the exact criteria remain to be finalized.
Additionally, the framework applies specifically to sterling-denominated stablecoins under UK jurisdiction. How the UK will treat foreign-issued stablecoins like USDT and USDC - which denominate in dollars and are issued by non-UK entities - is part of the broader crypto regulatory package expected in 2027.
Regulatory timeline and what comes next
The revised discussion paper is open for public comment until September 22, 2026. The Bank of England will review submissions, and finalized rules are expected by the end of 2026. Implementation will likely follow in 2027, aligning with the UK government's broader crypto regulatory framework.
That timeline puts the UK roughly two years behind the EU, which implemented MiCA's stablecoin provisions in June 2024, and about a year behind the US, where the GENIUS Act became law in 2025. The UK is moving faster than some expected, though - the original stablecoin consultation launched in late 2023, and regulatory development stalled during a period of political transition.
The 2027 comprehensive framework is expected to cover crypto exchanges, custody, lending, and staking in addition to stablecoins. The FCA will oversee most crypto firms, while the Bank of England retains authority over systemic stablecoins specifically. That dual-regulator structure mirrors the US approach, where the Fed, OCC, and state regulators share oversight depending on the type of institution.
For stablecoin issuers evaluating the UK market, the key question is whether the economics work under the final rules. A 30% non-interest-bearing reserve requirement plus a 40 billion pound issuance cap is manageable for most scenarios. If the comment period produces further concessions - a lower reserve requirement or a higher cap - the UK could become one of the more attractive jurisdictions for stablecoin issuance globally.
NOT INVESTMENT ADVICE. This article discusses regulatory developments and stablecoin policy. Nothing in this piece constitutes a recommendation to buy, sell, or hold any asset. Regulatory frameworks are subject to change during comment periods. Do your own research.
Frequently asked questions
What are the Bank of England's new stablecoin holding limits?
There are no individual holding limits. The Bank of England scrapped its original plans to cap individual holdings at 20,000 pounds and business holdings at 10 million pounds. Instead, it introduced a system-level cap of 40 billion pounds (roughly $50-53 billion) on total issuance for each stablecoin designated as systemic.
What is the 40 billion pound stablecoin issuance cap?
The Bank of England set a temporary ceiling of 40 billion pounds on the total amount of any single systemic stablecoin that can be in circulation. This is roughly $50-53 billion at current exchange rates. The cap is designed to limit systemic risk while the UK develops its full crypto regulatory framework, expected in 2027.
How must stablecoin reserves be structured under the UK rules?
Issuers of systemic stablecoins must hold at least 30% of their backing reserves in non-interest-bearing deposits at the Bank of England. The remaining 70% can be invested in short-term UK government bonds (gilts). This reserve split was a concession to industry, which argued that earlier proposals requiring larger central bank deposit ratios would make stablecoin issuance economically unviable.
Can stablecoin issuers pay interest to coin holders in the UK?
No. The Bank of England's revised rules maintain the ban on paying interest or yield to stablecoin holders. This applies regardless of how much yield the issuer earns on reserve investments. The ban keeps stablecoins classified as payment instruments rather than deposit products, similar to the approach taken by the US GENIUS Act and the EU's MiCA regulation.
Why did the Bank of England reverse its position on holding limits?
Industry pushback and scrutiny from the House of Lords Economic Affairs Committee prompted the reversal. Critics argued that capping individual holdings at 20,000 pounds and business holdings at 10 million pounds would make stablecoins unusable for institutional settlement and cross-border payments, undermining the UK's competitiveness in digital finance.
How do UK stablecoin rules compare to the US GENIUS Act?
Both frameworks ban interest payments to holders and require high-quality reserve backing. The main difference is that the UK imposes a hard issuance cap of 40 billion pounds per systemic stablecoin, which the US does not. The US requires 1:1 backing in cash, T-bills, or equivalent assets but does not cap total issuance. The US framework is also further along, having been signed into law in 2025.
How do UK stablecoin rules compare to Europe's MiCA?
MiCA, which went live in June 2024, does not impose hard issuance caps but restricts non-euro stablecoins that exceed 200 million euros in daily transaction volume. Both frameworks ban interest payments and require reserve backing. The UK's 30% central bank deposit requirement is similar to MiCA's requirement for significant e-money tokens. MiCA is fully operational, while the UK rules are still in the comment period.
When will the UK's stablecoin rules be finalized?
The current discussion paper is open for public comment until September 22, 2026. The Bank of England expects to finalize the rules by the end of 2026, with implementation in 2027. The broader UK crypto regulatory framework, covering exchanges, custody, and lending, is also expected in 2027.
What does the BIS stablecoin dollarization warning mean for the UK?
The Bank of International Settlements published research on June 1, 2026 warning that dollar-denominated stablecoins could displace domestic currencies in smaller economies. The UK's framework appears designed to encourage pound-denominated stablecoin issuance by making the economics workable, potentially helping maintain sterling's relevance in digital payments.
Which stablecoins would be affected by the 40 billion pound cap?
The cap applies to stablecoins that the Bank of England designates as "systemic." The exact criteria for that designation have not been fully defined, but it will likely depend on total issuance, transaction volume, and interconnectedness with the financial system. Currently, only Tether's USDT ($140 billion market cap) and Circle's USDC ($50 billion) are large enough globally to potentially approach the cap, though their UK-specific issuance would be a fraction of those totals.
Sean Ristau | @SeanRistau | 21Rates / The Daily Stack