BoE Drops Stablecoin Holding Limits, Easing Path to GBP Liquidity Pools

The Bank of England has revised a key part of its stablecoin regulatory proposal, eliminating individual holding limits in favor of a single aggregate issuance cap. This change removes a significant barrier to using sterling-denominated stablecoins for large-scale transactions, settlement, and as collateral.

The updated framework abandons previous plans to cap individual holdings at £20,000 and business holdings at £10 million per coin. It instead imposes a temporary £40 billion aggregate issuance limit for systemic stablecoins. Industry concerns persist, however. Coinbase's European policy head Katie Harries highlighted two unresolved issues: the duration of the "temporary" cap and whether stablecoins will be permitted for settlement in core wholesale markets, which she views as critical for the UK's tokenisation goals.

The new issuance-level cap simplifies compliance for market participants. It eliminates the need for firms to track individual account balances against holding limits, reducing operational complexity for brokers, exchanges, and liquidity providers. This facilitates larger GBP stablecoin transfers and enables broader use cases like cross-border settlement and collateralization. Deputy Governor for Financial Stability Sarah Breeden called the shift "a major milestone in delivering greater choice and innovation."

The BoE also adjusted reserve requirements to improve issuer economics. The mandated share of backing assets held in non-interest-bearing central bank deposits was reduced from 40% to 30%, freeing more reserves for assets like short-term gilts. This aims to boost the attractiveness of operating pound-backed stablecoins, a segment representing under 0.5% of the global market.

The UK's regulatory stance positions it between emerging US and EU frameworks. The US GENIUS Act promotes dollar-denominated payment stablecoins, while the EU's MiCA emphasizes reserve quality and supervision. The BoE's approach focuses on fostering innovation without heightening risks to a deposit-dependent banking system.

Barriers remain for traditional banks seeking to issue stablecoins, as they must use separate, insolvency-remote entities. ClearBank executives have warned this could hinder bank participation, potentially granting non-bank issuers and fintechs greater near-term flexibility. The central bank aims to finalize the rules by the end of 2026.