BoE Backs Off Tough Restrictions, Allows Stablecoins Up to $50B

The Bank of England has abandoned its proposed limits on individual stablecoin holdings, replacing them with a £40 billion issuance cap while easing reserve rules to support issuer returns ahead of a planned 2027 rollout.

In a statement issued Monday, the central bank confirmed it is scrapping earlier proposals that would have capped holdings at £20,000 for individuals and £10 million for businesses. Instead, it will introduce a system-wide “temporary issuance guardrail,” restricting the total supply of any single systemic stablecoin to £40 billion.

The BoE also adjusted its reserve framework, lowering the portion of assets required to be held in non-interest-bearing central bank deposits to 30%. This change enables issuers to allocate up to 70% of reserves into short-term U.K. government debt, such as Treasury bills with maturities under six months, allowing them to generate yield.

While issuers can earn returns on these assets, they remain prohibited from passing interest or dividends directly to users for simply holding stablecoins. However, the bank will allow activity-based incentives, including cashback rewards or loyalty points tied to transactions via Web3 platforms.

The shift follows strong feedback from both policymakers and industry participants, who warned that the original restrictions could undermine business models and weaken the U.K.’s competitive position. The BoE acknowledged these concerns, noting it had recalibrated its approach in response.

The move also comes after a parliamentary committee cautioned that the initial limits could significantly impact the viability of stablecoin issuers.

The reversal is widely viewed as a win for the crypto sector, which had criticized the earlier framework as overly restrictive and harmful to innovation.

Under the revised rules, individuals and businesses will face no limits on stablecoin holdings or transaction volumes. The BoE said the issuance cap is designed to guard against systemic risks, such as rapid capital outflows, while still enabling innovation and market growth.

The central bank added it may gradually ease and eventually remove the cap as the market develops. Following a final consultation period ending in September, the framework is expected to pave the way for regulated stablecoins to launch in the U.K. by 2027, alongside broader crypto regulation.