Bank of England Softens Stance on Stablecoin Regulations, Imposes $50 Billion Limit

New Issuance Limit Set to Foster Innovation and Competitiveness

The Bank of England (BOE) has revised its approach to stablecoin regulations, moving away from previous individual and corporate holding limits in favor of a £40 billion ($50.6 billion) total issuance cap. This change comes as part of the central bank's efforts to support the evolving crypto market ahead of the anticipated rollout of U.K. crypto regulations in 2027.

On Monday, the BOE announced it would no longer enforce a £20,000 ($27,000) cap for individuals or a £10 million limit for businesses regarding stablecoin holdings. Instead, the central bank has established a temporary issuance ceiling for systemic stablecoins at £40 billion.

In a significant shift, the BOE has lowered the required backing of non-interest-bearing central bank deposits from 100% to 30%. This adjustment allows stablecoin issuers to invest up to 70% of their reserves in short-term U.K. government securities, specifically treasury bills with maturities of less than six months. However, the BOE has prohibited direct interest payments to users holding these stablecoins, although activity-based incentives like cash-back tokens will be permitted.

This decision follows industry feedback and insights from a House of Lords committee, which suggested that the proposed limits could undermine the business viability of stablecoin issuers. The BOE acknowledged these concerns, indicating that it has re-evaluated its previous analysis.

As a result of the new guidelines, both individuals and corporations are no longer subject to restrictions on the volume or frequency of stablecoin transactions. The BOE aims to balance the need for financial stability with the goal of fostering innovation and maintaining the U.K.'s competitiveness in the global market.

The central bank plans to gradually lift the issuance cap as the market matures, with a final feedback period set to conclude in September. This new framework is expected to pave the way for regulated stablecoins to be officially launched in the U.K. in 2027, aligning with the implementation of the country's comprehensive crypto regulations.