Bank of England Proposes £20K Cap on Stablecoin Holdings in Transitional Phase

The Bank of England (BoE) has introduced a new proposal to cap how much individuals and businesses can hold in stablecoins during the early phase of their integration into the U.K.’s financial system.

In its consultation paper released Monday, the BoE proposed that retail users may hold up to £20,000 (US$26,000) in any single systemic stablecoin, while business accounts would be restricted to £10 million (US$13.1 million). These limits, the Bank emphasized, are temporary measures designed to mitigate potential outflows from traditional bank deposits as stablecoins enter wider circulation.

The central bank clarified that the restrictions won’t apply to stablecoins primarily used for trading or investment purposes, noting that most stablecoins today still serve those functions rather than day-to-day payments. Once systemic risks ease and market infrastructure matures, the BoE plans to gradually lift the caps.

Alongside the holding limits, the Bank detailed new reserve management requirements for issuers of systemic stablecoins. Up to 60% of reserves may be held in short-term U.K. government securities, while the rest must be deposited directly with the central bank—interest-free. This balance aims to ensure both liquidity and trust, particularly during periods of market stress.

The BoE also hinted at potential liquidity support mechanisms for regulated stablecoin issuers, allowing them access to its facilities to meet redemption demands if needed. However, it warned that the existing structure of the U.K.’s short-term debt market may not yet accommodate the scale of expected demand from large stablecoin issuers.

The move represents a shift from the BoE’s stricter 2023 stance, which had called for all stablecoin reserves to be fully held as central bank deposits. The Bank now acknowledges that allowing a mix of government debt and central bank deposits could promote confidence while easing structural constraints.

If executed correctly, analysts suggest the framework could give GBP-backed stablecoins a competitive edge by tying their reserves directly to central bank money—enhancing both credibility and systemic resilience. However, they also warn that missteps in the review and transition process could undercut the U.K.’s ambition to position itself as a global leader in digital-asset payments.

The consultation period runs until February 10, 2026, after which the Bank of England intends to finalize its stablecoin regulations for rollout later in the year.