Bank of England Removes Stablecoin Holding Limits, Introduces £40B Issuance Cap

New Regulatory Framework

The Bank of England eliminated per-issuer holding caps on sterling stablecoins in favor of a £40 billion issuance ceiling per stablecoin. The shift signals a move away from blanket restrictions toward asset-specific guardrails designed to allow greater adoption while containing systemic risk. Stablecoin issuers will now be permitted to hold a larger proportion of their reserves in government debt rather than holding only cash equivalents.

Rationale and Market Impact

The prior framework imposed limits on how much sterling stablecoins individual firms could issue, creating a constraint on market growth. The BoE's decision to pivot to an issuance cap rather than a holding cap suggests the regulator believes the £40 billion threshold provides sufficient systemic safeguards while removing friction for issuers seeking to scale. The permission to hold more reserves in government debt improves yield economics for stablecoin operators, likely lowering costs of capital and making UK-issued stablecoins more competitive with alternatives issued elsewhere.

Path Forward

The framework applies to any sterling stablecoin seeking authorization under the BoE's purview. By replacing micro-level holding restrictions with a macro-level issuance guardrail, the regulator has created a clearer on-ramp for new entrants and existing players seeking to expand operations in the UK, contingent on meeting the issuance limit and maintaining requisite reserve standards.