The Bank of England has scrapped previous holding limits on sterling stablecoins while imposing a new £40 billion cap. The move is part of a broader push to encourage stablecoin adoption in the UK without inviting systemic risk.
New framework for digital pound alternatives
Under the updated rules, the central bank removed a restriction that capped how much of a given stablecoin any single holder could own. That change opens the door for larger institutional positions. But the relief came with a ceiling: no sterling stablecoin can exceed £40 billion in circulation. The Bank says the limit is meant to prevent a single issuer from growing too big to fail—or too big to bail out.
The framework covers only sterling-denominated stablecoins. It doesn't affect dollar- or euro-pegged tokens that trade in the UK. Regulators have been watching the stablecoin market closely since the collapse of TerraUSD in 2022 and the brief de-pegging of Circle's USDC last year.
Why the £40 billion cap?
The Bank of England settled on the £40 billion figure after stress-testing scenarios where a stablecoin issuer fails or loses its peg. If a token's total value stays under that threshold, the central bank believes the rest of the financial system can absorb the shock. Go above it, and the risks start to look like those of a systemically important bank.
The cap isn't per-issuer—it applies to each individual stablecoin. That means a company could launch multiple tokens, each with its own £40 billion limit, as long as they're backed by different reserves. The Bank hasn't yet spelled out how closely related tokens would be treated.
BoE's push for UK financial innovation
By removing holding limits while capping total supply, the Bank is trying to thread a needle. It wants sterling stablecoins to become useful for payments, settlement, and wholesale trading. At the same time, it doesn't want a repeat of the chaos that followed the collapse of algorithmic stablecoins in other jurisdictions.
The new framework also signals that London intends to compete with other financial hubs—New York, Singapore, the EU—for stablecoin business. The UK's Financial Conduct Authority is still writing detailed rules for stablecoin issuers, including reserve requirements and audit standards. The Bank of England's cap gives the market a clear upper bound while those rules take shape.
No date has been set for when the £40 billion limit takes effect. The Bank says it will consult with industry participants first, but it expects the regime to be operational this year. Stablecoin issuers, meanwhile, are left weighing whether the UK's regulatory clarity is worth the hard ceiling on growth.
