The Bank of England has softened its proposed framework for systemic sterling stablecoins, replacing individual holding limits with a planned aggregate cap on issuance per systemic issuer. The revised framework points to a temporary £40 billion issuance cap per stablecoin issuer, a significant shift from earlier proposals that included limits of £20,000 for individuals and £10 million for businesses. The central bank has also eased the proposed reserve mix, allowing issuers to hold up to 70% of backing assets in short-term UK government debt, with the balance held as non-interest-bearing deposits at the Bank.
Why the Rule Shift Matters
The change addresses one of the biggest sticking points in the UK's attempt to build a workable stablecoin regime. Industry groups had argued that the earlier wallet-level limits would make sterling stablecoins difficult to use at scale. The Bank's move to an issuer-level cap, while still restrictive, gives banks, payment companies and crypto firms a cleaner structure to plan around. The reserve change is also important: stablecoin issuers generally need some yield on backing assets to make the business viable. Requiring too much cash to sit idle at the central bank could weaken the economics of issuance, while too little liquidity could create redemption risk. The revised split is an attempt to balance those pressures.
What Comes Next
The revised framework is part of the Bank's policy and rulemaking process, with final rules expected before regulated operations begin. This means the UK stablecoin market is not immediately open for business. Still, the direction of travel is notable. The UK has been under pressure to keep pace with the US and EU on digital asset regulation. A more flexible systemic stablecoin regime could make the country more attractive for firms building tokenised payment rails, provided the final rulebook does not reintroduce too much friction.
The market impact is likely to be more structural than immediate. Sterling stablecoins remain tiny compared with dollar-backed alternatives, but clearer rules could help banks and payment firms test products that were difficult to justify under a stricter holding-limit model. The Bank appears to have listened to the market's concern that tight wallet-level limits would make adoption awkward from day one.