Bank of England Proposes £20,000 Cap on Retail Stablecoin Holdings

The Bank of England has proposed a regulatory framework for stablecoins, introducing a £20,000 limit for individual retail users and a £10 million limit for businesses holding systemic stablecoins. This measure intends to mitigate risks associated with potential deposit flight from traditional banks as stablecoin adoption grows. The proposal emphasizes that these restrictions are temporary, aiming to ensure financial stability until risks diminish. Non-systemic stablecoins, primarily used for crypto trading, will be regulated separately. Additionally, during the initial phase of implementation, issuers must maintain reserves with a structure that includes 60% in short-term UK government debt and the rest as unremunerated deposits at the central bank. As the framework develops, the caps may be lifted once financial stability is assured. This consultation remains open until February 10, 2026, allowing for feedback and finalization of the rules by the Bank of England later in the year.

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