The Bank of England has removed the most contentious parts of its stablecoin blueprint—namely the proposed £20,000 limit on how much sterling stablecoin any individual could hold and the £10 million ceiling for businesses. In their stead, the central bank’s 22 June policy statement introduced a single £40 billion cap on the total amount of each systemic sterling stablecoin that can exist in the UK, while also easing reserve requirements so issuers can finally earn a respectable yield on the assets backing their coins.
Households and companies can now hold as much of a regulated pound‑stablecoin as they like, provided the overall market for that token does not exceed £40 billion. The cap is intended to be a temporary brake that the Bank says it will lift once it is confident that the risks to credit provision are under control.
This puts the UK in a relatively unique position among major economies. Both the United States and the European Union regulate stablecoins heavily, yet neither imposes a hard ceiling on how large a token denominated in its own currency may become. The United Kingdom is the first to introduce such a limit, although it has described it as “temporary” and signalled a review.
A friendlier framework with the growth ceiling left in place
The reversal on holding caps followed months of pressure. A cross‑party House of Lords committee told the Bank in early June that wallet‑level limits diverged from global norms and had alarmed founders. Issuers argued during the consultation that caps on individual balances were nearly impossible to enforce across wallets and exchanges.
Dropping the caps removes one of the biggest sources of friction for anyone who wants to use a sterling stablecoin for anything larger than pocket‑money payments. Cross‑border settlement and collateral posting were effectively off the table under per‑user limits.
The change that does the most for issuer economics comes from the reserve rules, which are easy to miss. Stablecoin issuers generate most of their profit from reserve income—the yield they earn on the assets backing each coin. The split between interest‑bearing government debt and non‑yielding central‑bank deposits determines whether the business model is profitable at all.
The Bank’s November 2025 draft would have required systemic issuers to park 40 % of their backing as unremunerated deposits at the Bank of England, with the remaining 60 % in short‑term gilts. The new framework cuts the deposit requirement to 30 % and permits issuers to hold up to 70 % in short‑dated UK government debt. Coins deemed systemic at launch can start with 95 % in gilts and gradually scale down as they grow.
Having more of the float earn a return is the difference between a viable sterling stablecoin and one that loses money against dollar‑denominated rivals holding Treasury bills.
The £40 billion ceiling sounds generous, and for a purely domestic payment instrument it is. But stablecoin networks thrive on scale: more users attract more merchants, deeper liquidity, more market makers, and richer integrations, each of which makes the coin more useful for the next adopter. A cap that arrives before those network effects mature can leave a coin safe and supervised, yet too thin to settle cross‑border or wholesale flows that justify its creation in the first place.
Coinbase’s European policy lead and ClearBank’s chief executive both made similar points this week, warning that a capped, reserve‑constrained sterling coin could be less commercially attractive than its dollar and euro counterparts.
The Bank’s primary concern is deposit flight—the prospect that households and firms would shift large balances out of bank accounts and into stablecoins, leaving banks with less cheap funding and a tighter capacity to lend, a pressure that builds fastest during periods of stress.
Thus the UK is supervising sterling stablecoins as potential competitors to commercial bank money, and the £40 billion cap is there to contain that competition before it turns systemic. The Bank has been explicit that it will lift the limit once it is satisfied that the risks to credit provision are managed, meaning the ceiling is a temporary brake the Bank fully intends to release.
Will anyone build a sterling stablecoin at scale in the UK?
The biggest problem facing the regime is demand. UK consumers already move money domestically in seconds through Faster Payments, so a pound stablecoin must beat an option that is already instant and free before anyone bothers switching. Merchants will not embrace it without a genuine reduction in fees.
Global companies continue to wire dollar tokens into their settlement stacks because USD liquidity remains deeper and scales without a ceiling, while a sterling coin offers them a shallower pool with a hard cap bolted on top. Issuers, for their part, are being asked to accept thinner margins and a smaller addressable market for the privilege of operating inside one of the most conservative regimes going.
Each of those factors has to break the right way before £40 billion of sterling stablecoin starts behaving like anything resembling a real market.
The dominance they are up against is severe and self‑reinforcing. Around 98 % of stablecoins in circulation are denominated in dollars, because most crypto markets, offshore exchanges, DeFi liquidity pools, and institutional settlement flows already price and clear in dollars. The US codified that advantage with the GENIUS Act, which embeds dollar stablecoins directly into the dollar system, and Europe is scrambling to build a euro answer after watching the same gap open up: Europeans handle 38 % of global stablecoin transactions while euro tokens make up about 0.3 % of supply. A sterling coin enters that contest from an even smaller base, and it does so carrying a ceiling that its dollar competitors get to skip.
There is a non‑zero chance that the BoE has this right. A conservative, fully supervised framework is arguably how stablecoins earn the trust of banks, fintech companies, and payment firms that would steer clear of an offshore‑style token, and it has signalled that the £40 billion figure could increase as it grows more comfortable. The UK would then be trading early speed for durable legitimacy—a defensible bet if regulated demand actually materialises.
However, the prevailing sentiment appears to be that Britain softened the optics while leaving the competitiveness problem unsolved. Scrapping the user cap removed the most visible irritant, but a per‑issuer ceiling and a 30 % non‑yielding reserve requirement still leave sterling stablecoins harder to scale than the dollar alternatives that already own the liquidity—an outcome the GENIUS Act’s implementation is busy entrenching in the US.
The BoE has lifted the limit on how much money a person can hold while keeping a limit on how large the market can grow, and those are two different problems. The UK has stopped debating whether sterling stablecoins should exist; what it is testing now is how large one can get before it starts looking enough like money to make the central bank nervous all over again.