The BoE replaced individual holding caps with a £40 billion temporary issuance limit for sterling stablecoins, easing a key risk for issuers like Circle.
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The Bank of England scrapped its proposed limits on how much of a sterling stablecoin any single user could hold, replacing them with a £40 billion temporary issuance cap for providers.
The earlier consultation had floated restrictions on individual holdings, a rule that drew pushback from industry groups who argued it would throttle adoption. The final framework, published Tuesday, moves the constraint to the supply side: no one issuer can put more than £40 billion of sterling-backed digital tokens into circulation.
The cap covers both payment stablecoins and tokenised deposits. The Bank called the limit temporary, saying it will be reviewed once issuance reaches that threshold, or after enough operational data has accumulated.
For issuers such as Circle, which operates USDC and has applied for a UK electronic money licence, the change removes a big uncertainty. The individual-holding caps had been flagged as a potential blocker for corporate and institutional adoption. Under the new rule, an issuer has more flexibility in distributing its tokens, as long as the total supply does not breach the ceiling.
The Bank also published final rules on the prudential treatment of stablecoin reserves. Backing assets must be at least 100% in high-quality liquid instruments, with a preference for central bank deposits and short-dated government debt. The requirement mirrors the EU's Markets in Crypto-Assets regulation, narrowing the compliance gap for firms active in both the UK and Europe.
The Treasury is expected to introduce primary legislation for stablecoins later this year, giving the BoE and the Financial Conduct Authority formal oversight. The Bank said the regime should be fully operational by the second half of 2025.
The £40 billion ceiling is large enough to cover projected demand over the next two to three years, several analysts said. It will eventually need to rise if sterling stablecoins become a standard settlement asset for UK capital markets. For the broader crypto market analysis, the UK's regulatory clarity could accelerate adoption by risk-averse institutions that have stayed on the sidelines.
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