UK Stablecoin Rules Cap Supply at £40B, Drop User Holdings Limits

The Bank of England published its final stablecoin framework on Tuesday, setting a £40 billion cap on systemically important sterling tokens and abandoning earlier proposals that would have limited individual holdings to £20,000 for retail users. The rules target a 2027 launch for regulated token operations.

Sterling stablecoin issuers classified as systemically important can now allocate up to 70% of reserve assets to short-dated UK government bonds, up from the 60% proposed in November 2025. The remaining 30% must sit in central bank deposits. The shift gives operators more yield on their backing without sacrificing the liquidity needed for redemptions, the BoE said.

The change followed industry feedback warning that stricter reserve rules would put UK-issued tokens at a competitive disadvantage versus dollar-pegged alternatives already in use. The Bank kept direct oversight of reserves because stablecoins of systemic size could strain payment infrastructure and bank funding, officials said.

Who gets exposed

The framework splits supervision: the BoE takes systemically designated tokens, the FCA handles everything else. HM Treasury decides which tokens get the systemic label. Issuers that move from FCA oversight into BoE jurisdiction will follow transition rules detailed in supplementary guidance expected later this year, the BoE said.

The £40 billion aggregate cap replaces the earlier per-user limits. The ceiling is temporary. Regulators will reassess it periodically and lift it once they judge that the risk of large deposit outflows into stablecoins has faded. The trigger for lifting the cap is not tied to a specific date but to an assessment of bank funding stability and credit provision, the BoE said.

Timeline

Public comment on the draft Code of Practice closes September 22, 2026. The final rulebook is due by year-end 2026. Systemically important stablecoins could launch under the new regime at any point during 2027 once the BoE signs off on each issuer.

What could break the setup

The biggest near-term risk is a rush of applications that strains the BoE's capacity to assess systemic designation before 2027. A second risk: the £40 billion cap may prove too low if large payment firms or banks decide to issue their own sterling tokens, forcing regulators to raise the ceiling under political pressure before the macroeconomic conditions they cite are met. A third is the legal challenge from issuers who argue the 30% central bank deposit floor is still too high compared to the roughly 10% cash reserve typical for money-market funds.

Industry groups have asked for clearer timelines on when the ceiling would be removed and for risk weighting that varies by issuer type. The BoE has not committed to either, the consultation response shows.

For traders, the framework makes sterling stablecoins a viable on-ramp for UK-based crypto activity but keeps the market tight on supply until the cap lifts. A regulated token that hits the £40 billion ceiling would need to stop issuing or face forced redemption, which could create premium spikes in secondary markets similar to those seen in USDC de-pegs. The BoE said it will monitor secondary market pricing as part of its supervisory role.