BOE scraps stablecoin ownership limits, raises debt reserve allowance

Issuers gain a direct advantage. They can now hold 70% of reserves in interest-bearing government debt, up from 60%. That allows them to earn yield on a larger portion of backing assets. Users face no artificial ceiling on holdings. That matters for institutional treasuries and payment companies that move large volumes through stablecoins.

Commercial banks face the largest exposure. The Bank of England has repeatedly warned that widespread stablecoin adoption could pull deposits away from banks, raising their funding costs and potentially shrinking credit availability. The £40 billion issuance cap limits that risk in the near term. It does not eliminate it. If the cap binds quickly, the central bank will face pressure to raise it, reopening the debate about bank disintermediation.

The non-interest-bearing deposit requirement still makes sterling stablecoins more expensive to operate than dollar-pegged products, which have no such rule. Whether the 70% government debt allowance is enough to make UK stablecoins commercially viable remains an open question.

The Bank of England said it will consult further on the operational details of the issuance cap. Sandbox participants under the Bank-FCA Digital Securities Sandbox are expected to go live in the coming months.