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- UK regulators lowered stablecoin reserve requirements to encourage innovation.
- Individual and business holding limits were removed in favor of a £40 billion issuance cap.
- New safeguards aim to protect banks while supporting digital asset growth.
The Bank of England has revised its planned stablecoin regulations after receiving feedback from the crypto industry and financial sector, introducing a more flexible framework aimed at supporting digital asset growth while protecting financial stability. The updated rules reduce reserve requirements, remove proposed user holding limits, and introduce a temporary issuance cap for major stablecoin providers.
The move highlights the UK’s attempt to balance innovation in digital payments with concerns that rapid stablecoin adoption could affect traditional banking systems. With the global stablecoin market currently valued at around $317.45 billion, regulators are closely watching how these assets develop.
Bank of England Lowers Stablecoin Reserve Requirements
A major adjustment in the new framework is the reduction of cash reserve requirements for systemic stablecoin issuers. Earlier proposals required companies to keep 40% of their reserves as deposits at the central bank, limiting how much capital could generate returns.
Under the revised rules, issuers will only need to hold 30% of reserves in cash at the Bank of England. The remaining 70% can be invested in short-term UK government debt, including Treasury bills with maturities of up to six months.
The change responds to concerns from the industry that excessive cash holdings could reduce profitability and discourage stablecoin companies from operating in the UK. Regulators believe the new structure provides more flexibility while maintaining access to secure, liquid assets.
UK Removes Stablecoin Holding Limits and Adds £40 Billion Cap
The Bank of England has also removed planned restrictions that would have limited individuals to holding £20,000 in stablecoins and businesses to £10 million. Instead, officials will introduce a temporary £40 billion issuance cap for each systemic stablecoin.
The cap is designed as a safety measure to prevent sudden large-scale shifts of money from traditional bank accounts into digital assets. The Bank has warned that major deposit movements could reduce banks’ ability to fund loans for consumers and businesses.
By focusing on controlling total supply rather than individual ownership, regulators aim to create a framework that supports adoption without creating unnecessary barriers for users.
Emergency Support and Redemption Rules Strengthen Oversight
The updated stablecoin rules also include a potential emergency liquidity facility. Eligible issuers could receive temporary support from the central bank during market stress by providing UK government bonds as collateral.
Stablecoins covered by the framework must remain redeemable at their face value within 24 hours. Issuers will not be allowed to pause redemptions during periods of financial pressure, and no minimum redemption amount will apply.
The Bank also rejected proposals allowing reserves to be stored in commercial bank deposits or money market funds, citing concerns about possible links between stablecoin problems and wider financial risks.
Also Read: Bank of England Launches Stablecoin Consultation Ahead of 2026 Regulatory Rules
The Bank of England’s revised stablecoin framework signals a more balanced approach toward crypto regulation in the UK. By reducing reserve pressure while maintaining safeguards, policymakers are attempting to make the country more attractive for digital asset businesses. The coming years will show whether this approach can encourage stablecoin innovation without threatening financial stability.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
