The Bank of England has relaxed the proposed framework for systemic sterling stablecoins, removing individual holding limits and replacing them with an overall cap on issuance by each systemic issuer.
TL;DR
- The Bank of England has moved away from proposed individual stablecoin holding limits.
- The revised framework indicates a temporary issuance cap of £40 billion per systemic stablecoin issuer.
- Issuers would also be allowed to hold a larger share of short-term UK government debt reserves.
- The rules are still part of a regulatory process and not a live retail stablecoin launch.
The change is significant because the previous approach had become one of the main sticking points in the UK’s attempt to build a workable stable currency regime. Previous proposals included limits of £20,000 for individuals and £10 million for businesses, a structure that industry groups said would make sterling stablecoins difficult to use at scale.
According to Reuters, the central bank has now opted for a simpler model, built around a temporary issuance cap of £40 billion per stablecoin. The Bank also relaxed the proposed reserve composition, allowing issuers to hold up to 70% of their assets backed by short-term government debt, with the balance held as non-interest-bearing deposits with the central bank.
Why the rule change matters
The stablecoin market is still dominated by dollar-denominated tokens, but the UK is trying to position itself as a more credible jurisdiction when it comes to digital payments, tokenization and market infrastructure. A viable framework for stable sterling would give regulated firms clearer rules for issuing payment tokens that can be used in real-world settlement activities.
The key point is not that a major sterling stablecoin suddenly went live today. The fact is that the Bank appears to have listened to market concerns that strict portfolio-level limits would make adoption difficult from day one. An issuer-level cap is still restrictive, but it gives banks, payment companies, and crypto companies a cleaner structure on which to plan.
For the market, the variation in reserves is also important. Stablecoin issuers generally need a certain return on collateralized assets to make their business viable. Requiring too much liquidity to sit idle at the central bank could weaken the economics of issuance, while a lack of liquidity could create redemption risk. The Bank’s revised distribution is an attempt to balance these two pressures.
What comes next
Timing always matters. The revised framework is part of the Bank’s policy and rule development process, with final rules expected before the start of regulated operations. This means that any article describing this as an immediate opening of the UK stablecoin market would be going too far.
Yet the direction of travel is remarkable. The UK is under pressure to keep pace with the US and EU when it comes to regulating digital assets. A more flexible systemic stablecoin regime could make the country more attractive to companies building tokenized payment rails, provided the final rules do not reintroduce too much friction.
The impact on the market will probably be more structural than immediate. Sterling stablecoins remain tiny compared to dollar-backed alternatives, but clearer rules could help banks and payments companies test products that are difficult to justify under a stricter holding limit model.
This report is based on information from Reuters and previous stablecoin consultation papers from the Bank of England.
This article was written by the News Desk and edited by Samuel Rae.
