BoE Proposes £20K Stablecoin Limit, Balancing Innovation

• BoE plans £20K cap on individual stablecoin holdings to balance innovation and stability.
• Businesses may hold up to £10M under the proposed framework with temporary limits.
• Consultation runs until Feb 10, 2026, with final stablecoin rules expected later that year.

The Bank of England (BoE) has proposed a £20,000 limit on individual stablecoin holdings to manage liquidity risks and safeguard financial stability. Announced on Monday, the measure forms part of a wider regulatory framework for sterling-denominated “systemic stablecoins.” The proposal reflects a cautious stance as the UK transitions toward regulated digital money use.

BoE Introduces Temporary Caps on Stablecoin Holdings

The proposed limit would restrict individuals to £20,000 per token, while most businesses could hold up to £10 million. The Bank described these restrictions as temporary, intended to prevent potential disruptions during the early stages of stablecoin adoption. Regulators plan to align the rollout with international efforts, notably those under development in the United States.

The BoE emphasized that His Majesty’s Treasury (HMT) would determine which stablecoin issuers or payment systems qualify as “systemic.” Once designated, these entities would operate under the Bank’s supervision. 

Deputy Governor for Financial Stability Sarah Breeden stated that the proposals “mark a pivotal step toward implementing the UK’s stablecoin regime,” showing the goal of balancing innovation and trust.

The consultation paper also mentioned that the holding limits could be removed once the financial system adjusts to the movement of liquidity from regular bank deposits to digital assets. However, these caps would not apply to stablecoins used for large-scale transactions under the Digital Securities Sandbox, which is jointly managed by the Bank of England and the Financial Conduct Authority (FCA).

Focus on Backing and Risk Management

Under the new framework, major stablecoin issuers would need to hold at least 40% of their liabilities as non-interest deposits at the Bank of England. The other 60% could be invested in short-term UK government bonds.

For issuers that are still growing or shifting from the FCA system, the Bank would allow up to 95% of their backing assets to be in government securities for a limited time. This is meant to make sure redemptions remain strong even during market stress while keeping operations stable.

The Bank also said it may introduce a liquidity backstop to support major issuers if they struggle to sell their assets during tough market periods. This would help protect overall stability and maintain trust in the digital asset market.

Officials explained that the plan is based on concerns about money quickly moving from regular bank deposits into stablecoins. Such moves could reduce funds available for loans and impact the wider credit system. The temporary cap, therefore, acts as a “speed-brake” to ensure a smooth and controlled shift without weakening the banking sector’s lending role.

Related: BOE Plans Exemptions to Stablecoin Cap After Pushback

Industry Reactions and Coordination with the FCA

The proposal has drawn mixed responses within the UK crypto industry. Some in the crypto industry warn that tight limits could slow innovation and drive investment to other countries. Others believe that clear regulations will strengthen long-term investor confidence by creating predictable safety standards in the digital asset market.

Under the plan, the FCA will oversee smaller stablecoin issuers, ensuring fair practices and consumer protection. If an issuer becomes large enough to pose wider financial risks, the Bank of England will step in to supervise its operations. 

Both regulators plan to release a joint document in 2026 explaining how the rules will work together in practice. The consultation remains open until February 10, 2026. Following this, the Bank intends to review public feedback before finalizing the regime in the second half of the year. 

After that, it plans to publish detailed Codes of Practice that will spell out how major stablecoin issuers must operate. The BoE’s plan lines up with similar global efforts like the EU’s MiCA rules. By keeping the limits cautious, the UK wants to push digital innovation without risking financial stability.

Capping individuals at £20,000 and businesses at £10 million shows a careful balance. The Bank aims to limit risk while giving new digital money room to grow safely. As stablecoins move toward everyday use, the goal is to make the transition steady and secure.