The Bank of England has proposed strict temporary limits on individual and corporate holdings of British pound-denominated stablecoins, aiming to bolster financial stability while navigating the competitive global race to regulate digital currencies.
Under the new public consultation, individuals would be capped at approximately $26,350 (20,000 British pounds) in these systemic stablecoins. Corporations would face a higher limit of about $13.2 million (10 million British pounds).
These temporary caps are designed to prevent a large-scale exodus of funds from traditional bank deposits into digital money. This measure seeks to mitigate potential risks to the UK’s credit supply, particularly within its mortgage market.
The central bank’s framework outlines prudential rules for issuers of systemic stablecoins, defined as those expected to achieve widespread use in retail and wholesale payments across the UK. The approach is notably stricter than frameworks emerging in the United States.
Despite the tougher stance, the Bank of England has softened some initial proposals following feedback from the industry, allowing for more flexibility in how stablecoins are backed to ensure commercial viability. The goal is to implement these rules swiftly, with a regime expected to take effect by late 2026 or potentially earlier, to keep pace with international rivals like the U.S. and the European Union.
The proposed regime focuses exclusively on British pound-denominated stablecoins. It does not apply to widely used U.S. dollar-denominated tokens such as USDT or USDC, which remain under the supervision of the Financial Conduct Authority (FCA).
Exemptions to the holding limits exist for large entities, including supermarkets or crypto trading platforms, that require higher balances. Stablecoins used in wholesale settlements within regulatory sandboxes operated by the Bank of England and the FCA are also exempt.
Issuers of systemic stablecoins would be required to back their tokens with a combination of short-term UK government debt, up to 60%, and non-interest-bearing accounts at the Bank of England for the remaining 40%. New entrants or those transitioning to the regime would have initial flexibility, allowing up to 95% in short-term government debt.
The central bank is also considering providing central liquidity facilities to support issuers during periods of market stress.
Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, called the proposals a “fundamental step” towards implementing the UK’s stablecoin regime next year. She affirmed the bank’s commitment to supporting innovation while building confidence in this emerging form of money.
The public consultation period for these proposals is open until February 10, 2026. The Bank of England, in conjunction with the FCA, is expected to publish a joint document next year to clarify the transition process.