Bank of England caps sterling stablecoins at £40bn

The Bank of England announced on June 22 a temporary £40 billion issuance cap for each sterling stablecoin it recognises as systemic and removed proposed per-user holding limits for individuals and businesses. The measures appear in a policy statement and a draft Code of Practice published the same day.

Under the revised framework, the Bank will apply a product-level cap to any sterling stablecoin it recognises as systemic rather than policing wallet-level balances. The draft raises the share of backing assets that may be held in interest-bearing short-term UK government debt to 70 percent, with the remaining 30 percent required to sit in central bank deposits that do not earn interest.

The November 2025 proposal had included temporary per-coin holding limits of £20,000 for individuals and £10 million for businesses and allowed up to 60 percent of backing assets to earn interest. The new draft removes those user-level limits and increases the permitted share of interest-bearing assets to 70 percent.

The Bank described the £40 billion ceiling as a transitional financial-stability tool designed to limit the risk that rapid stablecoin adoption would pull deposits out of banks fast enough to harm credit provision. The statement says the cap was calibrated using the same analytical framework that supported the earlier holding-limit proposal and that the cap will be reviewed, loosened and ultimately removed once the Bank is satisfied the risks are addressed.

Market comparisons highlight the scale constraint. The largest dollar tokens have significantly larger market capitalisations: roughly $186 billion for USDT and about $74 billion for USDC. A £40 billion cap converts to about $53 billion. The Bank noted a potential secondary-market effect: if demand exceeds the capped supply, a sterling token could trade above par rather than falling below its peg.

Firms already testing UK stablecoin services in the Financial Conduct Authority’s sandbox include Monee, ReStabilise, Revolut and VVTX. The Bank said the guardrail applies only to products recognised as systemic and entering its regime, not to every firm testing stablecoin services in sandboxes.

The draft retains the requirement that 30 percent of backing assets be held in non-remunerated central bank deposits. The document does not clearly resolve questions raised by lawmakers about whether commercial banks may issue stablecoins. A June report from the House of Lords Financial Services Regulation Committee urged reconsideration of holding limits, the unremunerated backing-asset requirement and restrictions on bank issuance.

The consultation on the draft rules closes on Sept. 22, 2026. The Code of Practice is intended to be finalised by the end of 2026, and regulated sterling stablecoins are expected to be able to operate in the UK from 2027.