Bank of England Modifies Stablecoin Regulations, Introducing £40 Billion Cap

The Bank of England (BoE) has announced a significant change to its stablecoin regulations, opting to eliminate prior caps on individual and corporate holdings. Instead, it enforces a temporary aggregate limit of £40 billion (approximately $50.6 billion) on any single systemic stablecoin's total circulation.

This reversal means that both individuals and corporations will no longer face restrictions on the amount they can hold, transact, or transfer. In tandem, the BoE has reduced the amount of non-interest-bearing central bank deposits required to back stablecoins from 40% to 30%. As a result, stablecoin issuers can invest up to 70% of their reserves in short-term U.K. government bonds while maintaining a ban on paying interest to stablecoin holders.

The change comes in response to pushback from the crypto industry and a report from the U.K. Parliament's House of Lords committee, which expressed concerns that the previous restrictions could jeopardize the viability of stablecoin businesses. "We acknowledge the issues raised and have reviewed the analysis supporting the calibration," stated the BoE, highlighting its willingness to adapt based on feedback received.

Additionally, while companies cannot pay direct interest, the BoE permits activity-based rewards such as cashback or loyalty points tied to transactions made in stablecoins, seeking to strike a balance between innovation and regulation. This new framework is intended as a safeguard for the broader U.K. credit system against sudden capital shifts, while also improving global competitiveness and growth in the sector.

The BoE plans to phase out the issuance guardrail entirely as the market matures, with the ultimate goal of launching regulated stablecoins in the U.K. by 2027. A final feedback period will conclude in September to refine these regulations before they come into effect.