Bank of England Drops Proposed Stablecoin Holding Limits

The Bank of England is developing a regulatory framework for “systemic stablecoins” that could be widely used for payments and have implications for financial stability, allowing them to operate as a “new form of money.” The rules focus on reserve assets and redemption capacity. They are central to both innovation in the UK payments market and the safety of the financial system, and are distinct from regulations governing ordinary stablecoins.

The latest draft sets an initial issuance cap of £40 billion for systemic stablecoins and allows issuers to place up to 70% of their reserves in interest-bearing assets, balancing returns and liquidity. The relevant threshold is expected to take effect in the month after the draft is published, while the full regime is planned for implementation in 2027.

The Bank of England is developing rules for systemically important sterling stablecoins amid concerns that rapid bank deposit outflows could constrain lending to the real economy. Its November 10, 2025 consultation therefore proposed temporary holding limits of £20,000 per individual for each stablecoin and £10 million for businesses. Unhosted wallets, where users control their own private keys, have become a focal point in debates over privacy, anti-money laundering and open payments.

On May 6, 2026, stablecoin issuer tGBP, Xapo Bank and Bitcoin Policy UK publicly opposed restrictions on unhosted wallets, warning that they would undermine remittances, peer-to-peer transfers and the competitiveness of the UK's fintech sector. However, Bank of England Deputy Governor Sarah Breeden clarified in a March 26 letter to the House of Lords that unhosted wallets would not be subject to a blanket ban but would have to meet regulatory standards. The industry argues that the practical hurdles could still amount to an effective ban.