The Bank of England scrapped its plan to cap how much individuals and businesses can hold in sterling stablecoins, a policy the industry had been calling a non-starter since it was floated last November. In place of wallet-level limits (£20,000 per person, £10 million per business), the BoE is now proposing a single £40 billion issuance cap per coin, applied at the issuer level.
That’s a meaningful climb-down. Wallet-level limits were operationally unworkable on decentralised ledgers where issuers don’t always have direct relationships with end users. The BoE had essentially proposed regulating something it couldn’t actually enforce. The shift to an issuer cap is cleaner in practice, but it introduces its own problem: the UK is now the only country in the world imposing an issuance ceiling on stablecoins denominated in its own currency.
The backing asset requirement also moved. The BoE trimmed from 40% to 30% the portion of reserves that must sit as non-interest-bearing deposits at the central bank. That still stings, keeping 30p of every pound raised in a zero-yield BoE account is a drag on any business model, especially when US competitors face no equivalent constraint. At short-dated gilt yields around 4%, the original 40% rule would have cost a UK issuer roughly £11 million a year per £1 billion in circulation. At 30%, the math improves, but doesn’t resolve.
What the BoE is actually protecting
The holding limits were always about one thing: stopping a bank run by the back door. If sterling stablecoins scale, depositors could quietly shift savings out of commercial banks and into stablecoin wallets. That drains the loan base banks rely on to extend credit. The BoE looked at Silicon Valley Bank’s collapse in 2023 and stress-tested what that kind of deposit flight could look like at scale.
The move from per-holder limits to a per-coin issuance cap is a smarter way to contain that same risk, it slows down total market size without creating a patchwork of per-wallet enforcement headaches. The £40 billion guardrail will be “reviewed regularly and removed once risks to credit provision have been addressed,” per the BoE. That language is deliberately vague, and Coinbase’s European policy head Katie Harries flagged it directly: what does “temporary” actually mean in practice?
The commercial bank problem nobody’s talking about
The quietly explosive detail in all this: commercial banks are structurally locked out of meaningful stablecoin issuance. The BoE confirmed last month that banks can only issue stablecoins from a “non-deposit-taking insolvency-remote entity with distinct branding from the deposit-taker.” Translation: set up a ring-fenced subsidiary, brand it separately, and operate it at arm’s length from your core business.
Mark Fairless, head of ClearBank, said it plainly: issuing stablecoins under those conditions would be “near impossible” for a commercial bank. That hands the market to non-bank fintechs and crypto-native issuers from day one, an unintended consequence that shapes who actually builds the UK stablecoin stack.
Rewards but no yield
The BoE is banning interest payments on stablecoins but will allow credit card-style transaction rewards. The distinction is economic sleight of hand, both mechanisms compensate holders for holding the coin. But the BoE draws the line at anything that looks like a savings product, likely to avoid stablecoins eating into deposit accounts from the demand side as well as the supply side.
In the US, banks lobbied hard for a similar interest ban, for the same reason. The policy is consistent globally. It will also shape product design: expect UK stablecoin issuers to build aggressive points and cashback programmes as the competitive battleground, rather than yield.
The bigger picture
Sterling stablecoins currently make up less than 0.5% of the $315 billion global stablecoin market. That number reflects how little infrastructure exists around GBP-denominated tokens, not a lack of demand for faster, cheaper sterling payments. The BoE wants to change that, the revised rules are explicitly designed to support regulated stablecoins going live in 2026, but the residual constraints, particularly on wholesale settlement use cases, still leave Coinbase and others questioning whether the UK’s tokenisation ambitions can be delivered.
The consultation is open until 22 September. The BoE aims to finalise rules by end of year.
