The Bank of England has overhauled its approach to regulating stablecoins, scrapping individual holding limits for users and instead capping issuance at £40 billion per coin. The central bank also relaxed reserve rules, allowing issuers to hold a greater share of their backing in government debt.
New issuance cap replaces individual holding limits
Under the revised framework, stablecoin issuers can no longer rely on per-user holding restrictions that previously limited how much of a single stablecoin any one person or entity could hold. Instead, the Bank of England introduced a hard cap of £40 billion on the total value of any given stablecoin in circulation. The move shifts the regulatory focus from consumer-level exposure to system-wide risk.
The change means that once a stablecoin reaches the £40 billion threshold, its issuer must stop minting new tokens until the circulating supply falls below the limit. The Bank of England said the cap is designed to prevent any single stablecoin from becoming so large that its failure could destabilise the financial system.
Reserve rules adjusted to include more government debt
Alongside the issuance cap, the central bank loosened the rules on what assets stablecoin issuers can hold as reserves. Previously, the guidance required a high proportion of very liquid, low-risk assets. Now issuers are allowed to hold a larger portion of their reserves in government debt, specifically UK gilts.
The adjustment gives stablecoin operators more flexibility in managing their reserve portfolios, potentially making it cheaper to back tokens. However, it also introduces slightly more risk, as gilt prices can fluctuate with interest rates. The Bank of England said the new reserve requirements are calibrated to ensure stability while acknowledging the operational realities of the industry.
What the changes mean for the stablecoin market
The regulatory shift removes a barrier that stablecoin issuers had complained about: the individual holding cap. That restriction, they argued, limited adoption and made it difficult for institutional investors to use stablecoins for large transactions. By replacing it with an issuance cap, the Bank of England aims to allow the market to grow without creating a single point of failure.
The £40 billion ceiling is well above the current circulating supply of any existing stablecoin pegged to the pound. Most UK-focused stablecoins remain small, so the cap is unlikely to be binding in the near term. It does, however, set a clear upper bound that issuers will have to plan for as they expand.
The greater allowance for government debt in reserves may also make the UK a more attractive jurisdiction for stablecoin projects. The decision aligns the UK more closely with frameworks in the European Union and Singapore, where similar rules have been adopted.
The Bank of England's new guidelines take effect immediately, and issuers will have a transition period to adjust their reserve holdings. The central bank said it will monitor market developments and may adjust the issuance cap or reserve requirements in the future.
