BoE Drops Stablecoin Holding Caps, Sets £40B System Limit

A final feedback window closes in September. The new framework is set to take effect alongside the broader U.K. crypto regime, expected in 2027.

The shift comes as real-world asset volumes show growing institutional interest. RWA perpetual futures volumes hit a new all-time high in May, rising 10.4% even as combined exchange volumes fell 3.45% to $4.41 trillion, the lowest since September 2024.

The BoE's U-turn removes one of the biggest regulatory overhangs for prospective U.K. stablecoin issuers. The original per-person and per-company caps would have limited adoption before the product even launched. With those gone, the remaining constraint is the £40 billion system-wide guardrail – a level that leaves room for multiple issuers to operate before triggering scaling discussions.

For issuers, the lower reserve requirement changes the economics of operating in the U.K. Under the old proposal, holding 100% of backing in zero-yield central deposits would have made it hard to cover operational costs without charging users. Now issuers can earn yield on 70% of reserves through short-term gilts, which currently yield around 4.5%.

The ban on paying interest to holders closes the door on a product structure that has drawn regulatory scrutiny in the U.S. The Securities and Exchange Commission has argued that yield-bearing stablecoins resemble securities. The BoE's approach – allowing activity-based rewards but not passive yield – keeps stablecoins in a payments framework rather than an investment product.

The £40 billion cap is roughly 15% of the current circulating supply of Tether's USDT, the largest stablecoin by market cap. For a single issuer, that ceiling is high enough to accommodate meaningful adoption. For the market as a whole, it means the BoE can tighten or loosen the limit as credit conditions shift.

The September feedback window will be the last chance for industry participants to shape the details before the framework becomes final. The 2027 implementation date gives issuers roughly two years to prepare applications and build compliance systems.