Bank of England’s Temporary Stablecoin Cap: Protecting Financial Stability While Supporting Innovation

The global stablecoin market has grown quickly, and the Bank of England released a consultation paper on November 10, 2025, explaining how it plans to handle stablecoins in the early stages of adoption. The bank suggested temporary limits on how much people and businesses can hold while the financial system adjusts to this new type of digital money. For individuals, the proposed limit is £20,000 (about $26,300) per stablecoin that the bank considers “systemic,” meaning large and widely used. For most businesses, the limit is £10 million, although some companies such as crypto exchanges or major retailers may receive special approval to hold more if needed. These limits would be temporary. Once the financial system becomes comfortable and stable with the use of digital money, the restrictions would be removed. The Bank of England is accepting public feedback on these proposals until February 10, 2026.

The goal of the Bank’s proposal is not to slow down stablecoin adoption, but to make sure it grows on solid ground. Stablecoins now support more than half of crypto trading activity worldwide, and many people rely on them for payments, remittances, and earning interest in savings platforms. As the United Kingdom strengthens its regulatory structure around digital assets, it aims to strike a balance between technology progress and financial stability.

Some crypto companies and payment organizations strongly criticized the Bank of England’s proposal, saying the rules could make the UK less competitive compared to the United States and the European Union. After this pushback, several news outlets reported that the Bank of England was considering special exceptions for businesses especially crypto exchanges that need to hold large amounts of stablecoins to operate smoothly.

A Move Toward a Safer and More Mature Stablecoin Future

The announcement made it clear that the Bank of England’s new rules will apply only to stablecoins tied to the value of the British pound (sterling-pegged stablecoins). Other stablecoins used mainly for everyday crypto trading will continue to be supervised by the Financial Conduct Authority (FCA) instead.

The Bank of England and the FCA also introduced a joint regulatory framework, and a full guide explaining exactly how the rules will work is expected in 2026. According to the Bank, if the UK Treasury declares a stablecoin “systemic”  meaning it is important enough to affect the wider financial system, then it will move under the Bank of England’s supervision. In that case, the Bank would focus on financial stability and risk management, while the FCA would continue to oversee customer protection and business conduct.

One of the major proposals in the consultation paper is how stablecoin issuers should hold their reserves. The Bank suggested that systemic stablecoin issuers could keep up to 60% of their backing assets in short-term UK government bonds. The remaining 40% would be held in special non-interest-earning accounts at the Bank of England. The goal is to ensure that stablecoins can always be redeemed for cash and maintain public trust, even during stressful market conditions.

For stablecoin issuers considered “systemic” from the start  or those transitioning into the Bank of England’s system, there is a temporary allowance to hold up to 95% of their reserves in short-term UK government debt. This flexibility is meant to help new issuers stay financially stable as they grow.

Another key policy proposal introduces central bank liquidity support. This means that in times of financial stress, the Bank of England could provide emergency funding to stablecoin issuers if they are unable to convert their assets into cash on the open market. This backstop is designed to prevent disruptions and protect the overall financial system.

Sarah Breeden, the Bank of England’s Deputy Governor for Financial Stability, reaffirmed the Bank’s goal: to encourage innovation while building trust in this new kind of digital money. She said that the Bank listened carefully to industry feedback and adjusted its plans to better reflect how stablecoin issuers interact with the central bank. According to her, these updated proposals are designed for a future where stablecoins become a meaningful part of everyday payments and give the industry the confidence and clarity it needs to develop responsibly.

The Bank of England’s temporary ownership cap is a precautionary step designed to guide stablecoins toward a stable, transparent, and well-regulated future. As the global stablecoin market grows, the Bank’s approach reflects the importance of protecting users while supporting ongoing innovation.