The Bank of England has softened its stablecoin plan, but not by enough to make the UK an easy market. The new £40 billion issuance guardrail is a welcome retreat from wallet caps, and still a warning to anyone hoping London would simply copy Washington.
Sterling stablecoins no longer face the strangest part of the Bank of England's first proposal. The Bank has dropped planned holding limits of £20,000 for individuals and £10 million for businesses, and replaced them with a £40 billion issuance guardrail for each systemic stablecoin. If you were trying to build a payment coin for payroll, supplier settlement or treasury use, that change matters immediately. A wallet cap would have made the product feel broken before it launched.
According to the Financial Times, the Bank set out the revised plan on June 22, lowered the share of reserves that must sit in zero-interest deposits at the central bank from 40% to 30%, and opened the rules for feedback until September 22. Final rules are expected by the end of 2026, with regulated UK stablecoins possible from 2027. That timeline is not distant in payments. Issuers, banks and exchanges have to make infrastructure decisions now.
The better version of the rule is still a very British compromise. Stablecoin issuers would be able to hold 70% of backing assets in short-term UK government debt, with 30% parked at the Bank of England earning nothing. The Bank gets direct visibility over a meaningful slice of reserves. Issuers get a thinner business model than they would like. You can see the bargain in one sentence: London wants stablecoin activity, but it wants the central bank close enough to touch the plumbing.
Frankly, that is more honest than the first draft. The earlier wallet caps looked like a regulator trying to invite a market in while keeping the door mostly shut. A £20,000 personal limit might work for a consumer payment experiment. It does not work for serious corporate use, and stablecoins are already far beyond the coffee-payment fantasy. Tether's USDT is about $186 billion in circulation and Circle's USDC is about $74 billion, based on public market data. A UK regime that ignores those numbers is not cautious. It is irrelevant.
The £40 billion guardrail changes that, but only partly. It gives firms such as Tether and Circle a route into the UK market without forcing every user into a capped wallet, and it gives smaller issuers a clearer rule to model against. But a cap is still a cap. If you are spending money on capital buffers, liquidity systems, redemption operations and operational resilience before issuing a single token, you have to believe the market can get large enough to repay the work. The biggest issuers can absorb that bet. Smaller firms will feel it first.
London is choosing control over speed
The comparison with the United States is not flattering if your only measure is issuer freedom. The GENIUS Act, signed into law in July 2025, created a federal framework for payment stablecoins, with one-to-one backing in cash or high-quality liquid assets and monthly reserve disclosures. It does not impose a coin-level issuance ceiling like the Bank of England's plan. The US has chosen scale first, with supervision wrapped around it.
The EU's MiCA regime sits somewhere else again. It has been live for stablecoin issuers since 2024 and puts hard limits around asset-referenced and e-money tokens, including restrictions that make yield-bearing stablecoins a non-starter. The UK avoided that exact route, but the 30% unremunerated reserve requirement has a similar commercial bite. If a dollar coin can hold more of its reserves in interest-bearing assets under another regime, a sterling coin has to work harder to justify itself.
That is the practical question under all the policy language. The UK can write a cleaner framework, demand stronger redemption, and insist that systemic coins do not quietly become shadow bank deposits. Good. But if the economics are too tight, the market will not punish the Bank with a public argument. It will just build somewhere else.
The Bank is clearly worried about credit creation. If billions of pounds move from commercial bank deposits into stablecoins, banks could have less funding to lend into the real economy. That is not a theoretical concern for a central bank. It is exactly the kind of risk the Bank of England exists to watch. The problem is that payment innovation does not wait politely while regulators reach perfect comfort. Users go where the products work.
For founders and finance teams, the signal is simple enough. A regulated UK stablecoin market is now plausible, not merely promised. But it will be a market built around the Bank's tolerance for systemic risk, not around crypto's appetite for fast scale. If you are expecting London to become a light-touch stablecoin hub, don't bother pretending this framework says that.
The more likely outcome is narrower and more useful: a handful of serious issuers, bank-linked products, and pound-denominated coins designed for payments where regulatory certainty matters more than maximum yield. That is not nothing. It could make stablecoins usable for UK settlement, exchange liquidity and corporate transfers in a way the first draft would have struggled to support.
Still, the £40 billion ceiling is only the beginning. The real test comes before 2027, when issuers decide whether the UK rulebook is worth building for, and when the Bank decides how temporary its temporary guardrail really is.
Also read: Most Stablecoins Just Sit Idle MoneySimpler Wants to Change That | Allium raises $40 million to become the Bloomberg terminal of blockchain data as regulators close in | Five former Ethereum Foundation researchers launch Ethlabs as the protocol's brain drain accelerates
