Bank of England caps individual stablecoin holdings at £20,000!

Key Takeaways

What are the main restrictions in the UK stablecoin rules?

The Bank of England will cap individual stablecoin holdings at £20,000 and business holdings at £10 million.

When will these regulations take effect?

The consultation runs until 10 February 2026, with final Codes of Practice expected later in 2026; it could launch in late 2026 or 2027.

The Bank of England unveiled comprehensive stablecoin regulations today that will cap individual holdings at £20,000. 

The temporary limit aims to protect traditional banking as digital money adoption grows. Businesses face a £10 million cap, though exemptions exist for larger firms.

The consultation paper marks a major step toward implementing the UK’s stablecoin regime in 2026. The rules apply only to sterling-denominated “systemic” stablecoins used for payments, not crypto trading.

Backing requirements and central bank support

The Bank of England will require systemic stablecoin issuers to back their tokens with specific assets. Issuers must hold 60% of backing assets in short-term UK government debt. The remaining 40% must sit in unremunerated accounts at the Bank of England.

New issuers considered systemic at launch can initially hold up to 95% in UK government debt. This flexibility helps them build scale before transitioning to the standard ratio.

The Bank is also considering emergency liquidity arrangements for systemic stablecoin issuers. During market stress, the central bank would provide liquidity if issuers cannot sell their backing assets in private markets. This backstop reinforces financial stability.

Tether, the world’s largest stablecoin, holds over $120 billion in US Treasury bonds, representing approximately 80% of its reserves. 

The UK’s approach differs significantly. British issuers can hold only 60% in government debt, must park 40% in zero-interest Bank of England accounts, and face holding caps. 

Tether operates with no such limits and earns billions in interest from its treasury holdings.

Two-Tier regulatory approach

The UK will split stablecoin oversight between two regulators. The Financial Conduct Authority will supervise non-systemic stablecoins used primarily for crypto trading. 

The Bank of England will regulate systemic stablecoins once HM Treasury designates them.

For systemic stablecoins, the Bank of England handles prudential regulation and financial stability risks. 

The FCA continues supervising consumer protection and conduct issues. The regulators will publish a joint approach document in 2026 explaining how the split works in practice.

Why stablecoin holding limits matter

The £20,000 individual cap addresses concerns about rapid deposit flight from traditional banks. 

If millions of people suddenly moved savings into stablecoins, banks would lose funding needed for lending to the real economy.

The Bank of England published an analysis today quantifying these risks. The holding limits remain temporary. 

They will lift once the financial system adapts to digital money without threatening credit availability.

The limits do not apply to stablecoins used for wholesale financial market settlement in the Bank and FCA’s Digital Securities Sandbox.