Bank of England scraps stablecoin holding limits

The Bank of England has released its policy statement and draft Code of Practice for systemic stablecoin issuers, marking a significant shift in its regulatory approach. The central bank has abandoned previously proposed per-coin holding limits in favor of an aggregate £40 billion issuance cap, while simultaneously raising the required gilt backing share to 70%. These changes represent a recalibration of the BoE's framework for managing stablecoin risks while attempting to foster innovation in digital payments.

The move away from per-coin limits reflects feedback from industry stakeholders and a recognition that such restrictions could fragment the stablecoin market unnecessarily. By implementing an aggregate cap instead, the BoE allows issuers greater flexibility in managing their portfolios while maintaining overall systemic risk controls. The £40 billion threshold is designed to ensure that stablecoin issuance remains manageable within the broader financial system and does not create systemic vulnerabilities. The increase in gilt backing from lower levels to 70% strengthens the reserve requirements, ensuring that stablecoin holders have substantial asset backing in low-risk government securities.

However, industry observers note that these regulatory parameters may still disadvantage sterling stablecoins relative to competitors in other jurisdictions. Jurisdictions with less stringent backing requirements or higher issuance caps may attract stablecoin issuers and users seeking greater flexibility. The combination of the £40 billion cap and 70% gilt backing creates a more conservative framework than some competitors, potentially limiting the appeal of sterling-denominated stablecoins in global markets where other options exist.

For the iGaming and broader fintech sectors, the BoE's framework matters because stablecoins are increasingly used for payments, settlements, and customer funding. A robust, clear regulatory framework for stablecoins supports their adoption in regulated industries. However, if sterling stablecoins remain less competitive than alternatives, operators may continue relying on other payment methods or foreign stablecoins, limiting the BoE's influence over digital payment innovation. The effectiveness of these rules will depend on how issuers respond and whether the framework attracts meaningful stablecoin development within the UK market.