Bank of England backs down on strict stablecoin holding limits, sets $50 billion issuance cap
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- Bank of England scrapped its proposed £20,000 individual and £10 million corporate stablecoin holding limits, replacing them with a £40 billion ($50.6 billion) temporary aggregate issuance cap per systemic stablecoin.
- BOE lowered the required share of non-interest-bearing central bank reserves backing stablecoins to 30%, letting issuers allocate up to 70% to short-term UK government debt (T-bills) with maturities under six months.
- Bank of England is banning interest or dividend payments to stablecoin holders but explicitly permitting activity-based rewards such as cash-back tokens and loyalty points linked to Web3 payment transactions.
- House of Lords Financial Services Regulation Committee prompted the reversal with a report warning the original caps "could have a significant impact on the business viability of stablecoin issuers."
- BOE said the new issuance cap is designed to shield the broader UK credit system from sudden capital flight while enabling global competition, and intends to phase it out as the market stabilizes.
- Bank of England opened a final feedback window closing in September, with regulated stablecoins expected to officially go live in the UK in 2027 alongside the country's broader crypto rules.
Why it matters: The Bank of England explicitly designed the new cap to protect the UK credit system from sudden capital flight while freeing issuers to earn yield on up to 70% of reserves in short-term gilts — a major shift from the original 100% non-interest-bearing deposit mandate. Crypto firms gain operational freedom; everyday users and corporates face no transaction restrictions.
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