BoE Slashes Stablecoin Cash Reserve, Sets £40B Cap

The Bank of England released the final version of its stablecoin regulatory framework on Tuesday, cutting the required cash reserves for systemic issuers from 40% to 30% of total assets. The move replaces an earlier proposal that drew heavy pushback from crypto firms and traditional financial institutions.

Under the new rules, systemic stablecoin issuers must hold at least 30% of reserve assets as central bank deposits. The remaining 70% can be invested in UK Treasury bills with maturities of up to six months. That is a significant shift from the original 60/40 split between gilts and cash, which would have forced issuers to park a large share of reserves in non-interest-bearing accounts.

Deputy Governor for Financial Stability Sarah Breeden said the change followed industry concerns about profitability and innovation. “We have adjusted our position to settle on bringing the central bank deposit requirement down to 30%,” she said in a statement. “This is a major milestone in delivering greater choice and innovation in UK payments.”

The Bank also scrapped its most controversial proposal: individual holding limits of £20,000 for consumers and £10 million for businesses. Instead, regulators will impose a temporary £40 billion cap on the total outstanding units of each systemic stablecoin. The measure is designed to prevent a rapid shift of deposits from commercial banks into stablecoin wallets, which officials warned could shrink banks’ funding base and limit their ability to lend to households and companies.

Another key requirement: systemic stablecoins must remain redeemable at face value within 24 hours. Issuers cannot suspend redemptions during periods of market stress, and there is no minimum redemption amount. The Bank rejected requests to allow reserves to be held in commercial bank deposits or money market funds, arguing that would increase contagion risks between stablecoins and the traditional banking sector.