UK Scraps Stablecoin Holding Limits, Imposes £40B Ceiling

The Bank of England dropped the proposed £20,000 holding cap for sterling stablecoins and the £10 million limit for businesses. In their place, a June 22 policy statement set a single £40 billion ceiling on each systemic sterling stablecoin and loosened reserve requirements, letting issuers earn a higher return on the assets backing their coins.

The reserve change cuts the mandated unremunerated deposit at the central bank from 40% of backing to 30%. Issuers can now hold up to 70% in short-term gilts, and coins classified as systemic at launch can start with 95% in gilts, scaling down as they grow. The shift has a direct impact on issuer profitability: stablecoin companies earn most of their revenue from the yield on reserve assets.

The UK is now the first large economy to impose a hard ceiling on how much of its own currency can circulate as a stablecoin. The US and the EU both regulate stablecoins but do not place a fixed cap on token supply. The Bank of England called the £40 billion limit temporary and promised a review.

The decision came after months of industry and political pressure. A cross-party House of Lords committee told the Bank in early June that wallet-level limits diverged from global norms and had alarmed founders. Issuers had argued that per-user caps are nearly impossible to enforce across wallets and exchanges.

Sterling tokens currently account for roughly 0.5% of a global stablecoin market worth about $315 billion. Dollar-denominated stablecoins dominate at 98% of supply, and most crypto trading, DeFi liquidity, and institutional settlement already runs in dollars. The US GENIUS Act further embeds dollar stablecoins into the financial system. The EU has no hard cap on euro stablecoins, though euro tokens make up only about 0.3% of supply despite European users generating 38% of global stablecoin transactions.

Coinbase's European policy lead and ClearBank's chief executive both warned this week that a capped, reserve-constrained sterling coin could be less commercially attractive than its dollar and euro rivals. The Bank of England's primary concern is deposit flight: a large-scale shift from bank accounts into stablecoins would squeeze banks' cheap funding and lending capacity, especially during stress. The £40 billion cap is designed as a temporary brake on that competition.

The BoE has signaled it will lift the ceiling once it is satisfied the risks to credit provision are under control. No specific timeline has been set.