Bank of England proposes a limit of £20,000 for Retail Stablecoin Holdings

The Bank of England has proposed temporary limits stable currency holding companies for private and corporate users and new rules on how issuers can manage their reserves.

In a consultation paper published on Monday, the central bank said individuals will be allowed to hold a maximum of £20,000 (US$26,000) in a single systemic stablecoin, while companies will face a limit of £10 million (US$13.1 million).

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

The restrictions are described as temporary measures, intended to prevent a sudden outflow from traditional bank deposits during the first phase of implementation.

According to the Bank, the limits would be relaxed and eventually lifted once risks to financial stability diminish. The proposal applies to stablecoins that are recognized as “systemic,” meaning they can be widely used in everyday payments. Non-systemic tokens will be regulated separately by the Financial Conduct Authority.

The consultation is accompanied by a detailed Financial Stability Paper outlining how issuers are required to maintain back-up assets.

Up to 60% of reserves could be held in short-term UK government bonds, with the remainder held in the form of unpaid deposits with the central bank. The article notes that allowing a greater stake in interest-bearing instruments could erode confidence in money by limiting liquidity during periods of stress.

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

A cautious approach

“Britain’s cautious approach is consistent with the way the government has been dealing with crypto regulation for some time,” Cessiah Lopez, head of policy and research at Solana’s Superteam UK, told me. Declutter.

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

“Requiring systemically important issuers to hold a portion of their reserves in central bank deposits could actually give GBP-backed stablecoins a structural advantage, as their reserves would be in central bank money rather than in commercial bank deposits,” Lopez said. This could in turn “strengthen the confidence and resilience of the system”, while the caps could be lifted “once the BoE risks try to prevent them from subsiding”, she added.

However, Lopez warned that if Britain fails to “get the review process and transition right,” it could negatively impact 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.

Declutter contacted the Bank of England for comment and would update this piece if they responded.