The Bank of England has abandoned its plan to restrict how much sterling stablecoin any single holder could own, according to proposals released this week. The central bank also set a £40 billion limit on the total amount of sterling stablecoins in circulation before it would trigger enhanced regulatory scrutiny.
The shift marks a retreat from the BoE's earlier framework, which had proposed individual holding caps. Those caps drew pushback from the sector. By dropping them, the bank signals it sees the risk of large holders as manageable under other controls rather than something that requires hard position limits.
What the BoE kept is tighter than it initially looked. Stablecoin issuers will face stricter rules on which assets can back their coins. The £40 billion guardrail functions less like a ban and more like a pressure point: once systemwide issuance hits that level, the BoE has said it will conduct more intensive reviews and may impose additional safeguards.
The 2027 timeline gives issuers roughly three years to prepare for a regulatory regime that was still being sketched in 2024. That window is tight enough to force real compliance work, long enough that established players have time to adjust their balance sheets and operational systems.
The removal of holding caps eases a constraint that would have affected hedge funds, large traders, and institutional treasuries that treat sterling stablecoins as short-term liquidity tools. Those users can now accumulate positions without hitting a hard ceiling. That flexibility may accelerate adoption among institutional cash managers, though the BoE's framing suggests it expects most growth pressure to come from retail and corporate payment flows.
The backing-asset rules are where the BoE's real regulatory teeth show. By narrowing what collateral issuers can use, the bank reduces the risk that stablecoins sit atop lower-quality or hard-to-liquidate reserves. This is a direct response to lessons from 2023's banking turmoil and subsequent stablecoin scrutiny.
The £40 billion issuance cap itself is less a ceiling than a circuit breaker. Once hit, the framework shifts from a lighter-touch regime to active BoE intervention. In practice, that means issuers approaching the threshold will have to engage with regulators early, stress-test their reserve arrangements, and build out operational resilience ahead of time. The effect is coordination without outright caps.