The Bank of England has dropped the part of its stablecoin plan that the industry hated most: the proposed £20,000 limit on how much sterling stablecoin someone could own, along with the £10 million cap on companies. Instead, in its June 22 policy statement, the central bank set a £40 billion limit on the quantity of each systemic sterling stablecoin in Britain, and relaxed reserve rules so that issuers can finally earn a decent return on the money backing their coins.
Households and businesses can now own as much of a regulated sterling stablecoin as they want, and each of these coins can grow to £40 billion before it has to be shut down.
This puts Britain in a rather unusual place among major economies. The US and EU both heavily regulate stablecoins, but neither puts a hard cap on how big a token can become in its own currency. Britain was the first to do so, calling the limit “temporary” and promising to review it.
Sterling tokens account for about 0.5% of a global stablecoin market worth about $315 billion, which puts the real test of the new regime well beyond legality and questions whether a pound can ever become big enough to rival the dollar tokens that already command global crypto liquidity.
A friendlier environment in which the growth ceiling is maintained
The reversal of cap retention came after months of pressure. A cross-party House of Lords committee told the Bank in early June that portfolio-level limits had diverged from global standards and had alarmed founders, and that issuers had spent the consultation period arguing that caps on individual balances were virtually impossible to enforce across portfolios and exchanges.
Dropping them removes one of the biggest sources of friction for anyone looking to use a sterling stablecoin for anything bigger than spending money payments, as cross-border settlement and posting collateral were effectively disregarded under the per-user limits.
The change that will have the most impact on issuers’ economics comes from reserve rules, which are easily overlooked. Stablecoin issuers make most of their money from reserve income, the return they earn on the assets backing each currency, so the split between interest-bearing government debt and non-yielding central bank deposits determines whether the business works at all.
The Bank’s November 2025 draft would have required systemically important issuers to park 40% of their cover as unremunerated deposits with the Bank of England, while the remaining 60% would be invested in short-term government bonds. The new framework reduces the deposit requirement to 30% and allows issuers to hold up to 70% in short-term UK government bonds, with a step up allowing coins deemed systemically important at launch to start from 95% in government bonds and be phased out as they grow.
More of the float is now earning returns, which is the difference between a viable sterling stablecoin and one that loses money against dollar rivals holding government bonds.
The £40 billion ceiling sounds generous, and for a purely domestic payment instrument it is. But stablecoin networks live at scale: more users attract more sellers, deeper liquidity, more market makers, and more integrations, each of which makes the coin more useful to the next user that shows up. A limit that bites before these network effects mature could leave a coin safe and supervised, yet too thin to govern cross-border or large-scale flows that would justify its creation in the first place.
Coinbase’s European policy chief and ClearBank’s CEO both made similar points this week, warning that a capped, reserve-constrained sterling currency could be less commercially attractive than its dollar and euro cousins.
The Bank’s real concern is deposit flight, the prospect that households and businesses would shift large balances from bank accounts to stablecoins, leaving banks with less cheap funding and tighter lending capacity, with that pressure increasing most rapidly during stress.
So the UK is monitoring sterling stablecoins as potential competitors to commercial bank money, and the £40 billion cap is there to curb that competition before it becomes systemic. The Bank has explicitly stated that it will lift the cap once it is satisfied that the risks to lending have been addressed, meaning that the cap is a temporary brake that the Bank fully intends to lift.
Can someone in Britain build a sterling stablecoin at scale?
The biggest problem facing the regime is demand. UK consumers can already transfer money domestically in seconds via Faster Payments, so a one-pound stablecoin will have to beat an option that’s already instant and free before anyone can bother to switch. Sellers won’t get into it without a real reduction in costs.
Global companies continue to plug dollar tokens into their settlement stacks because USD liquidity remains deeper and scalable without a ceiling, and a sterling coin offers them a shallower pool with a hard cap on it. Issuers, in turn, are being asked to accept lower margins, a smaller addressable market and the privilege of operating within one of the most conservative regimes.
Each of these needs to be on the right track before £40 billion of stablecoins start behaving like anything resembling a real market.
The dominance they face is severe and self-feeding. About 98% of stablecoins in circulation are denominated in dollars, as most crypto markets, offshore exchanges, DeFi liquidity pools, and institutional settlement flows are already priced and transacted in dollars.
The US codified that advantage into law with the GENIUS Act, which embedded dollar stablecoins directly into the dollar system, and Europe is scrambling to build a euro response as it has seen the same divide emerge, with Europeans conducting 38% of global stablecoin transactions, while euro tokens make up around 0.3% of the supply. A sterling coin enters that battle from an even smaller base, and does so with a ceiling that its dollar competitors can surpass.
There is no chance that the BoE has this right. A conservative, fully controlled framework may be how stablecoins gain the trust of banks, fintech companies and payments companies that would avoid an offshore-style token, and it has indicated that the figure could rise from £40 billion as it becomes more comfortable. Britain would then trade early speed for lasting legitimacy, a defensible gamble if regulated demand actually materializes.
The prevailing sentiment, however, seems to be that Britain softened the optics while leaving the competition problem unresolved. Removing the user cap has removed the most visible irritation, but a per-issuer cap and a 30% non-yielding reserve resistance still make sterling stablecoins harder to scale than the dollar alternatives that already have the liquidity, an outcome that the implementation of the GENIUS Act in the US is busy enshrining.
BoE has lifted the cap on how much money someone can hold, while keeping the cap on how big the market can grow, and those are two different issues. Britain has stopped debating whether real stablecoins should exist, and what it is now testing is how big one can get before it starts to look enough like money to make the central bank nervous again.