BoE drops user caps, sets $52.9B stablecoin issuance guardrail

The Bank of England has published final policy positions and draft rules for sterling-denominated systemic stablecoins, removing proposed individual holding caps and introducing a temporary $52.9 billion (£40 billion) issuance guardrail for each systemic coin.

The framework applies to tokens that could become widely used in payments and that pose risks to UK financial stability. Oversight will be split: the Financial Conduct Authority will regulate issuance, custody and admission to trading for qualifying UK-issued stablecoins, while the Bank of England will supervise systemic payment risks. The Bank plans to finalise a Code of Practice by the end of 2026, after which the rules will apply to recognised systemic issuers.

The issuance guardrail replaces earlier proposals that would have capped individual holdings at about $26,440 (£20,000) and business holdings at about $13.2 million (£10 million) per coin. The Bank said a single issuance limit is simpler to implement and aims to limit large shifts of deposits into stablecoins while the banking system adapts. The guardrail will be reviewed regularly and removed when the Bank is satisfied that risks to bank lending and credit provision have been addressed.

Reserve requirements have been eased from the earlier draft. In steady state, issuers must hold 70% of backing assets in short-term UK government debt and 30% in unremunerated Bank of England deposits, instead of an earlier 60/40 split. Firms judged systemic at launch may use a step-up approach and hold up to 95% of reserves in UK government securities while they scale. Eligible government debt may have residual maturities of up to six months. Commercial bank deposits are not permitted as backing assets because of potential financial and operational risks and the possibility of contagion with the wider banking system.

The rules also cover capital, safeguarding, redemption rights and failure arrangements. The Bank confirmed plans for a Central Bank Liquidity Facility to provide a liquidity backstop for systemic stablecoin issuers. The Bank describes the package as less restrictive than its first draft while keeping a focus on liquidity and redemption rights for users.

Stablecoin markets have grown rapidly: global stablecoin market capitalisation was $315.3 billion as of June 22. The Bank rejected alternatives such as transaction limits, arguing they would not necessarily prevent large movements from bank deposits into stablecoins.