Bank of England Proposes £20,000 Cap on Retail Stablecoin Holdings

The Bank of England has proposed temporary limits on stablecoin holdings for retail and business users and new rules for how issuers can manage their reserves.

In a consultation paper published Monday, the central bank said individuals would be allowed to hold up to £20,000 (US$26,000) in a single systemic stablecoin, while businesses would face a £10 million (US$13.1 million) cap.

Notably, the proposal “would not cover stablecoins used as assets for non-systemic purposes, such as the buying and selling of cryptoassets,” the bank wrote, adding that such cases remain to be “the predominant use of stablecoins today.”

The restrictions are described as transitional, designed to prevent sudden outflows from traditional bank deposits during the initial phase of adoption.

According to the Bank, the limits would be loosened and eventually removed once the risks to financial stability subside. The proposal applies to stablecoins recognized as “systemic,” meaning those that could be widely used in everyday payments. Non-systemic tokens will be regulated separately by the Financial Conduct Authority.

The consultation accompanies a detailed Financial Stability Paper that outlines how issuers would be required to maintain backing assets.

Up to 60% of reserves could be held in short-term UK government debt, with the remainder held as unremunerated deposits at the central bank. The paper notes that allowing a greater share in interest-bearing instruments could affect trust and confidence in money by limiting liquidity during periods of stress.

The central bank said it is also considering providing recognized issuers access to its liquidity facilities to ensure they can meet redemption requests. It acknowledged that the size and structure of the UK’s short-term debt market may not support large-scale stablecoin demand in its current form.

A cautionary approach

“The UK’s cautionary approach is aligned with how the government has been dealing with crypto regulation for quite some time now,” Cessiah Lopez, head of policy and research at Solana’s Superteam UK, told Decrypt.

The Bank’s latest proposal represents a softening from its 2023 discussion paper, which recommended that all reserves be held as central bank deposits only.

“Requiring systemic issuers to hold some of their reserves in central bank deposits could actually give GBP-backed stablecoins a structural edge, since their reserves would be in central bank money rather than commercial bank deposits,” Lopez said. In turn, this could “help strengthen confidence and systemic resilience,” while the caps could be lifted “once risks BoE are trying to avoid subside,” she added.

Lopez warned, however, that if the U.K. fails to “get the review process and transition right” it could negatively affect the country’s ambitions to be a leader in digital-asset payments.

The consultation will remain open until February 10, 2026, after which the Bank of England plans to finalize its rules for implementation later next year.

Decrypt reached out to the Bank of England for comment and would update this piece should they respond.