Bank of England drops proposed holding caps for sterling stablecoins, sets £40 billion issuance guardrail

The Bank of England published a policy statement and draft Code of Practice for systemic sterling-denominated stablecoin issuers on Monday, replacing previously proposed holding limits with a temporary £40 billion ($52.9 billion) issuance guardrail for each stablecoin.

The BoE defines systemic sterling stablecoins as tokens used widely in payments that could pose risks to UK financial stability or undermine confidence in the financial system if disrupted. Stablecoins not designated as systemic and used mainly for crypto asset transactions, like USDT and USDC, will remain under the sole supervision of the Financial Conduct Authority, the central bank said in the policy statement. 

According to the statement, the BoE revised its proposed backing asset composition to allow issuers to hold 70% of backing assets in short-term UK government debt with residual maturity of up to six months, up from 60% proposed in November 2025. The remaining 30% must be held as unremunerated deposits at the bank, down from the 40% requirement in the earlier proposal.

The central bank also said issuers must hold capital equal to the higher of six months of operating expenses or the cost of recovery and orderly wind-down planning, while maintaining reserve assets in trust structures designed to protect coin holders in both normal operation and failure scenarios.

For redemptions, the BoE said requests must be processed as soon as practicable and within 24 hours of receipt of a full request, defined as the point at which the issuer has received the request, completed AML/KYC checks, and received the coins in its wallet.

The central bank also confirmed that systemic stablecoin issuers will not be permitted to pay interest on coin holdings. However, it said activity-based rewards and non-interest incentives remain permissible where consistent with use as a means of payment.

Coinbase’s Head of Policy for Europe, Katie Harries, said in a statement to The Block that the bank’s rules “deliver among the strongest stablecoin regimes in the world,” citing reserve composition, capital requirements, access to central bank deposits, and a liquidity backstop.

However, Harries noted two outstanding questions: what "temporary" means for the per-coin issuance cap, adding that the UK is the only country capping issuance of stablecoins in its own currency, and whether stablecoins can be used for settlement in core wholesale markets, without which the UK's tokenization ambitions "will not be delivered."

The BoE will accept industry feedback on the draft until Sept. 22. The central bank intends to finalize the code by the end of 2026, allowing recognized systemic stablecoin issuers to begin operating under the regime in 2027.