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A $52.8 billion issuance cap replaces per-user holding limits. Reserve flexibility improves. But key questions about the UK’s tokenization ambitions remain unanswered.
The Bank of England has published its draft regulatory framework for systemic stablecoins, and compared to what the industry was facing six months ago, it represents a meaningful step in the right direction — with enough unresolved questions to keep the debate running well into 2027.
The policy statement, released Monday, outlines how regulated British pound-backed stablecoins will operate under UK law. The central bank has eased reserve requirements, scrapped the per-user holding limits that drew sharp industry criticism last year, and replaced them with a temporary $52.8 billion issuance cap across the systemic stablecoin market. The BoE is aiming to finalize its rulebook by the end of 2026, with a planned rollout in 2027.
The reaction from the industry was measured approval mixed with pointed concern about what still needs to change.
What Actually Changed
The November 2025 consultation proposed holding limits that would have capped individual users at 20,000 pounds per stablecoin and businesses at 10 million pounds. Industry respondents pushed back hard, arguing that these restrictions would make sterling stablecoins operationally impractical and commercially uncompetitive against dollar-backed alternatives that face no equivalent constraints.
The Bank listened. Those per-user limits are gone, replaced by a market-wide temporary issuance cap of 40 billion pounds — approximately $52.8 billion — applied across the systemic stablecoin category rather than at the individual user level. The change allows households and businesses to hold and transact with sterling stablecoins without hitting arbitrary personal ceilings, which was the core operational complaint from the industry.
Reserve requirements have also been relaxed in issuers’ favor. Under the new rules, systemic stablecoin issuers can hold up to 70% of reserves in interest-bearing government debt, up from the 60% ceiling proposed previously. Allowing a larger portion of reserves to be held in yield-generating assets rather than cash or near-cash equivalents improves the economics of running a compliant sterling stablecoin operation — a practical consideration that affects whether issuers can build sustainable business models within the regulatory constraints.
The BoE framed the issuance cap as a temporary guardrail. “This guardrail will be reviewed regularly and removed once risks to credit provision have been addressed,” the bank said in its Monday announcement. The underlying concern driving the original holding limits — that large-scale adoption of stablecoins could pull deposits out of the banking system and reduce credit availability — hasn’t disappeared. The cap is a different mechanism for managing the same risk, at the system level rather than the user level.
The UK’s Unusual Position
One aspect of this framework that hasn’t attracted enough attention is how unusual it makes the United Kingdom relative to other major jurisdictions.
Katie Harries, Coinbase’s head of policy for Europe, noted that the UK is now the only country capping issuance of stablecoins in its own currency. No equivalent mechanism exists in the EU’s MiCA framework for euro-denominated stablecoins, and the US stablecoin legislation currently moving through Congress contains no comparable issuance ceiling for dollar-backed tokens.
That distinction matters for competitive positioning. Sterling stablecoins operating under a $52.8 billion cap are inherently constrained in how large they can grow, regardless of market demand. If demand for regulated sterling stablecoins expands — driven by institutional adoption, tokenized asset settlement, or broader retail usage — the cap creates a ceiling that doesn’t exist for their dollar-denominated competitors.
Harries raised two specific questions she said need answers before the UK can fully benefit from stablecoin development: what “temporary” actually means in practice for the issuance cap, and whether sterling stablecoins will be permitted for settlement in core wholesale markets. The second question is particularly consequential — without wholesale market settlement capability, the UK’s broader tokenization ambitions face a fundamental gap in their infrastructure.
Progress With Reservations
ClearBank CEO Mark Fairless captured the prevailing industry mood with precision. The shift away from per-user holding limits toward the issuance cap is a positive development. The Bank clearly incorporated industry feedback from the consultation process, and the resulting framework is more workable than what was proposed in November.
But Fairless pushed back on the backing asset requirements, suggesting they could still constrain viable business models despite the improvement. “The endgame should be a truly risk-based framework rather than a one-size-fits-all approach,” he said, warning that uniform requirements applied across different stablecoin use cases put the UK at risk of leaving sterling stablecoins “at the starting line while other markets move ahead.”
The concern isn’t hypothetical. The global stablecoin market is overwhelmingly dollar-dominated, with Tether and USDC collectively representing the vast majority of stablecoin market capitalization. Sterling stablecoins are starting from a much smaller base and need a regulatory environment that gives them room to compete — not just for UK users, but as settlement instruments in international markets where sterling has traditional significance.
The BoE’s framework, while improved, still applies primarily to stablecoins designated as systemic — those widely used in payments and judged to pose financial stability risks. Non-systemic stablecoins used mainly for crypto trading remain under the Financial Conduct Authority’s supervision rather than the BoE’s regime. This dual-track approach means the regulatory environment for sterling stablecoins depends significantly on which designation a given token receives, and the criteria for that determination involve judgment calls that will shape the market’s development in ways that aren’t yet fully clear.
The Path to 2027
The BoE’s timeline gives the industry roughly 18 months to work through the remaining questions before the framework goes live. Finalization of the rulebook by end-2026 and a 2027 rollout means the consultation period that produced these changes still has more iterations to run.
The shift from the November 2025 proposal to the June 2026 draft shows that the Bank is responsive to substantive industry feedback. The per-user limits were a real problem and they’ve been replaced with something more workable. The reserve flexibility improvement is real. These aren’t cosmetic changes.
What remains is harder. The issuance cap’s definition of “temporary” needs to be made concrete enough that issuers can build business plans around it. The wholesale settlement question needs resolution if tokenized asset markets are going to use sterling stablecoins as their settlement layer. And the backing asset requirements need enough flexibility to accommodate different issuer models without forcing a compliance structure that only the largest, best-capitalized operators can sustain.
Deputy Governor Sarah Breeden signaled in May that the Bank was reconsidering its approach following industry pushback — and the June publication confirms that signal was genuine. Whether the same responsiveness continues through the remaining consultation phases will determine whether the 2027 rulebook positions sterling stablecoins to compete seriously in the global digital finance landscape, or constrains them to a niche that dollar-backed alternatives will continue to dominate.
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