The Bank of England has overhauled its stablecoin rulebook, scrapping individual holding caps in favor of a £40 billion per-coin issuance limit and permitting issuers to hold more of their reserves in government debt.
The shift represents a material loosening of the original framework the BoE proposed in 2023. Rather than impose granular caps on how much of any single stablecoin could circulate, the regulator now sets a single aggregate threshold. The move signals confidence that concentrated issuance poses less systemic risk than the BoE initially feared, or reflects pragmatism about enforceability.
Under the revised rules, stablecoin issuers can now hold a higher proportion of backing reserves in gilts and other government securities instead of cash. That change has immediate consequences for issuers' balance sheets: government debt typically yields more than bank deposits, so the allowance improves returns without requiring issuers to take on additional risk. The BoE's willingness to count gilts as adequate reserves also suggests the regulator views the stability of UK government debt as sufficient collateral backstop for retail stablecoin holders.
The £40 billion guardrail applies per coin, not per issuer, meaning a single operator could theoretically issue multiple stablecoins up to that threshold each. The design avoids penalizing issuers who want to launch competing products, though it does prevent any single stablecoin from becoming too large relative to the wider sterling ecosystem.
These changes follow the Treasury's designation of stablecoin issuers as regulated payment systems in 2023, which brought them under the BoE's purview. The framework now sits between the original 2023 proposals and what issuers had lobbied for, carving out relief on the technical holding mechanics while keeping the overarching limit in place.
The practical effect: issuers operating below £40 billion in circulation face fewer compliance headaches around reserve composition and can optimize their funding mix. Issuers approaching or exceeding that threshold face a hard ceiling. The BoE has signaled it will monitor breaches and enforce against them, though exact penalties remain undefined in publicly available guidance.
The shift also reflects changing market realities. Stablecoin adoption in the UK remains modest compared to the US, and the BoE's original concern about runaway growth has not materialized. The regulator appears willing to trust that market discipline and competitive pressure will prevent any single stablecoin from dominating sterling rails before the £40 billion limit becomes binding.