The Bank of England systematically abandoned the proposed private holding limit for sterling stablecoins and instead moved the issuer-level limit to £40 billion. With MiCA on the verge of full implementation in the EU, the UK is positioning itself as a more flexible alternative. The question now is whether this approach can regulate stablecoins without undermining their usefulness as a payment and settlement infrastructure.
The Bank of England’s latest proposals for stablecoins, the UK’s central bank, represent a clear step back from its previous more restrictive stance and could make the country a more hospitable environment for cryptocurrency businesses.
Previously, individuals could hold no more than £20,000 of equivalent stablecoins, while businesses had to hold a limit of £10 million. These proposed limits were the most contentious element of the BoE’s initial consultation in November 2025. One of the biggest concerns within the industry was that a regulated sterling stablecoin, while viable in theory, would become unusable in practice.
The UK’s transition timing highlights comparisons with the European Union’s Regulated Markets in Cryptocurrency Assets (MiCA), whose transition period ends on July 1, 2026.
The UK appears to be focusing on flexibility for now as the EU fully implements a more demanding, albeit legally certain, regime. These differences will likely impact which markets digital asset companies prioritize, as well as how many utility stablecoins they hold onto as their payments and settlement infrastructure once they are introduced into regulated finance.
From holding limit to issuance limit
The holding limits that defined the BoE’s original proposal were designed to address one of the key concerns about systemic stablecoins. That is, what happens when it gets big enough to affect the wider banking system?
The widely used sterling stablecoin could theoretically pull deposits out of commercial banks if users start treating it as a close substitute for bank money. In a stress scenario, these kinds of changes could have significant implications for bank funding and lending, raising further concerns about financial stability.
The key question was whether personal holding limits were the right way to manage that risk. Enforcing limits at the user level required extensive real-time monitoring, with intermediaries required to track balances across wallets, exchanges, and payment providers before transactions were completed. For equipment designed to move value quickly, this can create significant (and prohibitively expensive) operational friction, ultimately impacting commercial viability.
The bipartisan Financial Services Regulatory Commission report, released on June 3, 2026, has already urged the BoE to reconsider, arguing that the same financial stability goals can be achieved at the issuer level.
The BoE’s focus on financial stability remains, but its revised approach is now moving in exactly that direction. The June 22 policy statement sets the total issuance limit per system stablecoin at £40 billion, setting a cap on total circulating supply rather than limiting what any individual or company can hold.
The preliminary model has also been put in a more commercially viable direction. Under the November 2025 proposals, issuers could hold up to 60% of their collateral as UK short-term government debt and at least 40% as non-remunerated deposits with the Bank of England.
As per the latest draft rules, the split ratio moves to 70% and 30% respectively. This is an important development considering that reserve income is one of the main ways stablecoin issuers generate revenue.
Allowing more equity in interest-bearing government debt helps address concerns that the previous model would have weakened the commercial case for regulated issuance.
MiCA Deadline and European Stablecoin Model
Unlike the UK, the EU is now moving from the transition phase to the implementation phase. MiCA’s transition period ends on July 1, 2026, and the European Securities and Markets Authority (ESMA) has said there will be no grace period for companies that fail to secure full approval. These companies are currently in the final stages of finalizing their EU operations.
The requirements for stablecoin issuers are stringent. Issuance of Electronic Money Tokens (EMT) requires authorization as a credit institution or electronic money institution within the EU. Tokens that reach significant size face additional obligations, including supervision by European banking authorities and more stringent reserve requirements. Offshore issuers cannot extend their existing structures into the EU and instead require a separately authorized European entity.
MiCA therefore offers a very different compromise to the UK’s emerging framework. The biggest advantage is a harmonized path to markets in 27 countries, but only for companies that can meet burdensome certification and compliance standards.
Although framed in terms of financial stability and monetary sovereignty, the regime also has protectionist elements. By analogy, stablecoins face transaction restrictions when used as a means of payment, and compliance standards raise barriers for offshore and cryptocurrency entities that do not yet resemble regulated financial institutions.
UK validity and EU passport
The UK’s approach appears to align more closely with how stablecoins operate as payment infrastructure. The shift from wallet-level limits to issuer-level limits, combined with a more viable reserve model, suggests a framework designed around the actual mechanics of stablecoins rather than treating them primarily as a variation of bank deposits.
It is also important to note that the £40 billion cap is intended to be temporary, providing the BoE with macro-level protection while the market develops rather than permanently restricting how stablecoins can be used.
The advantage of MiCA is immediate market access. The EU offers a harmonized route to large regulated markets for companies that can meet the approval criteria. However, access is only useful if the product is commercially viable and actually usable. The UK could offer a more flexible model, but it remains in draft form until at least the end of 2026 and is not expected to become operational until 2027.
Timing is important because digital asset companies do not choose between the UK and the EU alone. Under the GENIUS Act, Singapore’s MAS, Dubai’s VARA, Hong Kong’s HKMA and the United States are all developing regulatory frameworks for stablecoins or digital assets. For companies deciding where to locate their activities, the question is which jurisdiction provides the clearest rulebook as well as the best combination of legal certainty, market access and commercial viability.
British politics adds another variable, but it should not be overstated. Prime Minister Keir Starmer’s resignation on June 22 may complicate the broader narrative on competitiveness, but it is unlikely to directly change the BoE’s stablecoin roadmap.
A more pressing issue for businesses is that the UK framework still needs to move from consultation to implementation.
Can regulation preserve what makes stablecoins useful?
The right regulatory question about stablecoins is not simply whether to allow them, but whether the rules allow them to function as intended. This means a redundant framework viable enough to keep issuers in business, payment mechanisms viable enough to compete with existing rails, and safeguards reliable enough to support trust and adoption.
The BoE’s June amendments move in that direction. The EU has chosen a different path, one based on strict licensing and institutional compliance as the price of access to a large integrated bloc. Both approaches make sense, but have yet to be fully tested in a mature, regulated stablecoin market.
The next phase of stablecoin regulation will be evaluated less by how comprehensive the rules are on paper and more by how acceptable they are in practice. Legal certainty alone is not enough if regulated stablecoins are slower, more expensive, or less flexible than the products they are intended to replace.
The most important jurisdictions will be those that can bring stablecoins within regulatory boundaries while retaining the speed, accessibility, and usability that made them popular.