Bank of England drops wallet caps, keeps £40B stablecoin limit

The Bank of England has made sterling stablecoins more practical for payments, but it still plans to limit how large any one systemic token can grow. In a June 22 policy statement and draft Code of Practice, the Bank dropped earlier proposals to cap holdings for individuals and businesses, replacing them with a temporary £40 billion issuance ceiling per systemic product.

That change removes a major obstacle for wallets, merchants, and companies that might want to use a regulated pound stablecoin in normal payment flows. The Bank also eased reserve rules for issuers. Up to 70% of backing assets can now be held in eligible short-term UK government debt, up from 60% in the earlier proposal, while 30% must remain in central bank deposits.

The consultation on the draft rules runs until Sept. 22, 2026, and the Code is expected to be finalized by year-end. The UK still expects regulated stablecoins to begin operating from 2027.

The cap shows the Bank is still trying to limit pressure on bank deposits and credit creation if adoption grows quickly. It also acknowledged that a supply ceiling could create a different problem: if demand outpaces issuance, a systemic pound stablecoin could trade above par in secondary markets because users want more tokens than issuers are allowed to create.