Bank of England Proposes £20,000 Limit on Stablecoin Holdings for Users

The BoE's move marks a key milestone in the UK's digital-money regulation agenda, building upon a 2023 discussion paper and aligning with other jurisdictions racing to define the stablecoin frontier. It reinforces the dual objectives of the central bank: to support innovation in payments and to ensure public trust in money and financial stability.

The consultation sets out a number of major policy proposals. Issuers of systemic sterling-stablecoins would be allowed to hold up to 60 per cent of their backing assets in short-term UK government debt, with the remaining backing held as unremunerated accounts at the BoE. For those issuers that are identified as systemic at launch or transitioning from the FCA regime, the limit on government-debt backing is 95 per cent, to support viability at scale.

In a novel and more controversial step, the BoE is also proposing temporary holding limits: for individual users, the cap would be £20,000 per coin, and for businesses £10 million, although exemptions would apply for firms requiring higher balances for operational purposes. These limits would not apply to stablecoins used exclusively for wholesale settlement under the BoE/FCA Digital Securities Sandbox.

Another novelty of the proposed regime is access to central bank liquidity arrangements: the BoE is considering standing liquidity-backstop facilities for systemic issuers in times of stress, further reinforcing the notion that such stablecoins could be treated akin to payment systems rather than mere crypto-assets.

Under the consultation, stablecoins that are not sterling-denominated or not considered systemic will remain under the FCA's supervision, mainly for conduct and consumer-protection issues, rather than being subject to the BoE's prudential and stability tool kit.

Deputy Governor for Financial Stability, Sarah Breeden, said the proposals are designed to give industry clarity and confidence. “Today’s proposals mark a pivotal step towards implementing the UK’s stablecoin regime next year. Our objective remains to support innovation and build trust in this emerging form of money,” she said.

The push for stablecoin regulation in the UK comes at a time when jurisdictions are racing to establish rules around digital money. The US Congress has passed the GENIUS Act, which outlines the duties of issuers of dollar-backed stablecoins, while the EU’s Markets in Crypto-Assets Regulation (MiCA) has been in effect since December 2024.

The BoE itself has warned that stablecoins, if widely adopted, could pose bank-run style risks: if deposits or holdings migrate at pace into stablecoins, the credit-creation capacity of banks and the wider financing of the real economy could come under pressure.

The consultation thus reflects a strategic calculation: to allow private-sector digital money to flourish under clear rules, while safeguarding the integrity of money and payments. Some legal and advisory commentators describe it as “finally going further and faster” in the UK’s implementation of stablecoin rules.

The proposed holding limits and, particularly, the dual regime of oversight-BoE for systemic, FCA for non-systemic-have already generated sharp feedback from the crypto industry. Trade groups and firms say the imposition of a £20,000 cap on individual holdings, plus strict rules on backing assets, could stifle innovation and encourage emigration of issuer activity to more lenient jurisdictions.

Furthermore, making a division between systemic and non-systemic stablecoins intrinsically introduces threshold and classification issues: how is an issuer supposed to know when it has become systemic? What constitutes deposit-migration risk? The BoE and FCA have committed to publish in 2026 a joint approach document that will further define the regime boundaries and transitions.

The proposals will require firms operating, or able to operate, UK-based or UK-accessible stablecoins, to revisit the core structural and operational practices of backing-asset eligibility, redemption mechanisms, liquidity and stress-testing frameworks, access to BoE accounts, and compliance with the potential holding caps. Some issuers may seek to register themselves outside of the UK or limit their exposure within the UK as a means of avoiding being brought within the BoE's regime. Indeed, the consultation document invites such feedback.

The consultation is open until 10 February 2026, meaning market participants have just under three months to provide feedback on the detailed regime proposals. The BoE intends, after that, to publish detailed Codes of Practice, likely later in 2026, setting out the legal and regulatory obligations for systemic stablecoin issuers. Final rules are expected to be implemented in 2026.

As the UK accelerates, this also raises competitive questions. Jurisdictions that delay may risk becoming “innovation dumping grounds” for issuers shunned by more regulated markets. The UK appears intent on asserting itself not just as a follower, but as a benchmark jurisdiction in the global stablecoin regulation race.

The BoE consultation is an important development to track in the broader Web3 and digital-money ecosystem. It signals that stablecoins are no longer fringe crypto-experiments, but candidates for recognition (and regulation) as bona-fide forms of money.