Bank of England stablecoin cap: industry pushback and the dual-track UK regime
In short: The FCA opened consultation on CP26/13: Cryptoasset Perimeter Guidance on 15 April 2026 (closes 3 June 2026), completing the FCA side of the UK’s dual-track stablecoin regime. On the Bank of England side, the £20,000 retail cap, £10 million business cap and 60:40 backing split in the Bank’s November 2025 proposals face sustained industry pushback. Deputy Governor Sarah Breeden told the House of Lords on 11 March 2026 that the Bank is open to alternatives. Draft Codes of Practice follow in H2 2026.
The FCA opened consultation on CP26/13: Cryptoasset Perimeter Guidance on 15 April 2026, with responses due by 3 June 2026. That completes the FCA side of the UK’s dual-track stablecoin regime. On the Bank of England stablecoin track, the Bank’s consultation paper of 10 November 2025 proposed a £20,000 retail stablecoin holding cap, a £10 million business cap and a requirement for issuers to back 40 per cent of reserves with unremunerated central bank deposits. The consultation closed on 10 February 2026, with industry pushing back hard on each element. On 11 March 2026, Deputy Governor Sarah Breeden told the House of Lords that the Bank is “genuinely open” to other ways of meeting its objectives. With the FCA authorisation window opening on 30 September 2026 and draft Codes of Practice expected in H2 2026, firms planning sterling stablecoin launches face two regulatory workstreams running in parallel.
The dual-track UK stablecoin perimeter
UK stablecoin regulation runs on two tracks under different statutes. HM Treasury laid the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (SI 2026/102) on 15 December 2025, with commencement on 25 October 2027. The instrument brings issuance of qualifying stablecoins, safeguarding of qualifying cryptoassets and related activities into the FCA’s regulatory perimeter under Part 4A of the Financial Services and Markets Act 2000. The FCA’s authorisation, conduct and prudential rules sit across CP25/14 (June 2025), CP25/40 to CP25/42 (December 2025), and CP26/13 (April 2026).
The Bank of England’s role is different. Under Part 5 of the Banking Act 2009, as extended by the Financial Services and Markets Act 2023 to digital settlement assets, HM Treasury may “recognise” a sterling stablecoin issuer or service provider as systemic. Recognition triggers Bank supervision, with the FCA continuing to regulate conduct. The Bank’s mandate is financial stability: capital, liquidity, redemption and operational requirements aimed at preventing a stablecoin failure from disrupting the wider payments system. HM Treasury has not yet recognised any stablecoin issuer.
What the Bank of England stablecoin proposals say
The Bank’s consultation paper Proposed regulatory regime for sterling-denominated systemic stablecoins sets four headline requirements for stablecoins recognised as systemic. First, individual holdings would be capped at £20,000 per coin and business holdings at £10 million, with an exemption regime for the largest non-financial businesses. Second, issuers must back coins on a 60:40 split: up to 60 per cent in short-term sterling gilts, with 40 per cent in unremunerated deposits at the Bank of England. Third, issuers systemic at launch (or transitioning from the FCA regime) can initially hold up to 95 per cent of backing assets in short-term gilts, to support viability as they scale. Fourth, the Bank is considering central bank liquidity arrangements as a backstop should an issuer be unable to monetise its backing assets in stress.
The caps do not apply to wholesale settlement balances used in the Bank and FCA’s Digital Securities Sandbox. The Bank’s stated rationale is run-risk and substitution: a sterling stablecoin used at scale for payments is exposed to redemption pressure and asset fire-sales, and at scale could disintermediate bank deposits. The holding caps are presented as a transition measure that would be removed once the regime no longer poses risks to the supply of finance to the real economy.
The principal industry objections
Industry responses to the £20,000 retail cap, £10 million business cap and 60:40 backing split fall into three groupings. First, on enforceability: the holding caps cannot be policed at coin level without identity infrastructure or wallet monitoring that the UK does not have, and that would push the regime into the kind of intrusive surveillance the Government has elsewhere disavowed. Second, on commercial viability: requiring 40 per cent of reserves to sit in unremunerated central bank deposits is a structural drag on issuer economics that does not apply to dollar-denominated competitors authorised in other jurisdictions. Third, on scope: a £10 million business cap is set well below the working balances needed to make sterling stablecoins useful for B2B treasury or wholesale settlement.
Crypto industry trade bodies and several large issuers warned that the regime as drafted would push activity offshore, leaving UK users transacting in dollar-denominated coins issued under foreign regimes. The House of Lords Financial Services Regulation Committee opened a parallel inquiry into the growth and proposed regulation of stablecoins in the UK in February 2026. On 11 March 2026, Deputy Governor Sarah Breeden and Executive Director Sasha Mills gave evidence; Breeden told the Committee that the Bank was “genuinely open” to other ways of achieving its financial stability objectives, and confirmed that self-hosted wallets will not be permitted to hold systemic sterling stablecoins.
Commercial implications for issuers, custodians and PSPs
The Bank of England regime applies only after HM Treasury recognises an issuer as systemic. In practice that is a small population at any moment. The FCA regime, by contrast, applies to every qualifying stablecoin issuer in the UK once SI 2026/102 commences. Firms planning sterling stablecoin launches therefore need to scope two parallel sets of obligations: the FCA authorisation, conduct and prudential rulebook, and the Bank’s Codes of Practice if and when scale brings them into systemic status.
Three operational consequences follow. First, governance documents and capital plans should anticipate a step change in obligations on systemic recognition. Second, reserve-management arrangements should accommodate a 60:40 split as a contingency, even if the Bank ultimately revises it. Third, application timing matters. The FCA window opens on 30 September 2026 and closes on 28 February 2027, with the FCA seeking to approve applications before SI 2026/102 commences on 25 October 2027. Firms preparing FCA applications should read our guidance on regulatory perimeter and market entry.
| Requirement | FCA regime (qualifying stablecoins) | BoE systemic regime |
|---|---|---|
| Trigger | Issuance of any qualifying stablecoin in or from the UK | HM Treasury recognition that an issuer is systemic |
| Statutory basis | FSMA 2000 Part 4A; SI 2026/102 | Banking Act 2009 Part 5 (as extended by FSMA 2023) |
| Lead regulator | FCA | Bank of England (joint with FCA) |
| Key consultations | CP25/14; CP25/40 to CP25/42; CP26/13 | CP November 2025; Codes of Practice (H2 2026) |
| Application window | 30 September 2026 to 28 February 2027 | Following HMT recognition |
| Holding cap | None proposed | £20,000 individual; £10 million business (under review) |
| Backing | Per FCA conduct and prudential rules | 60% short-term gilts; 40% unremunerated BoE deposits (proposed) |
| Commencement | 25 October 2027 | On HMT recognition |
Viewpoint
The dual-track architecture is a sound choice. Conduct regulation of any qualifying stablecoin issuer should sit with the FCA. Prudential and operational requirements for a sterling stablecoin large enough to threaten financial stability should sit with the central bank. The operational difficulty is in the joins. Recognition as systemic is a major event for an issuer’s economics and governance, and the trigger criteria need to be transparent enough that boards can plan for it well in advance.
The £20,000 retail cap is, in my view, unlikely to survive in its current form. Enforceability concerns alone make it a poor regulatory tool, and the Bank’s own evidence to the House of Lords accepts as much. The 60:40 backing split is the more interesting question. Unremunerated central bank deposits look like a deal-breaker on the issuer P&L, but they are also the cleanest way to put central bank money behind a private payment instrument. A revised split, rather than abolition, is the more likely landing zone. From advising payments firms on parallel approval workflows, the operational risk that boards consistently underestimate is the cost and complexity of running two regulatory tracks at once. Treating the Bank’s regime as a distant prospect is a mistake. Application files for the FCA window opening in September should already anticipate the systemic threshold question.
Links
Bank of England consultation paper: Proposed regulatory regime for sterling-denominated systemic stablecoins. HM Treasury policy note and draft SI: Regulatory regime for cryptoassets (regulated activities). FCA: CP26/13: Cryptoasset Perimeter Guidance. House of Lords inquiry: Growth and proposed regulation of stablecoins in the UK. Related Bratby Law commentary: Payments Regulation practice area; PSR/FCA consolidation; Agentic AI, payments consent and PSRs 2017.
If you are advising on stablecoin issuance, custody, or downstream payment services and want to scope your firm’s exposure to the dual-track UK regime, contact Rob Bratby at Bratby Law.
