The Bank of England has walked back its proposed caps on individual stablecoin holdings, opting instead for a £40 billion issuance ceiling while loosening reserve rules to improve issuer economics ahead of a planned 2027 launch.

In a statement on Monday, the central bank confirmed it is dropping earlier plans that would have limited holdings to £20,000 for individuals and £10 million for corporations. In their place, the BoE will introduce a system-wide “temporary issuance guardrail,” capping the total circulation of any single systemic stablecoin at £40 billion.

The bank also revised its reserve requirements, cutting the share of assets that must be parked in non-interest-bearing central bank deposits to 30%. This change allows issuers to deploy up to 70% of reserves into short-term U.K. government debt, such as Treasury bills with maturities under six months, enabling them to earn yield.

While issuers can benefit from these returns, they are still prohibited from passing interest or dividends directly to users for simply holding stablecoins. However, the BoE will allow usage-based incentives, including cashback rewards and loyalty programs tied to transactions conducted via Web3 applications.

The shift comes after feedback from industry participants and policymakers warned that the original restrictions could undermine business models and weaken the U.K.’s competitiveness. The BoE acknowledged these concerns, noting that it has adjusted its framework accordingly.

The move also follows a parliamentary committee report cautioning that the initial limits could significantly impact the viability of stablecoin issuers.

The reversal is seen as a win for the crypto industry, which had criticized the earlier proposals as overly conservative and restrictive to innovation.

Under the updated regime, individuals and businesses will face no limits on stablecoin holdings or transaction volumes. The BoE said the issuance cap is designed to mitigate systemic risks, such as rapid capital outflows, while still supporting innovation and market growth.

The central bank added that it may gradually ease and ultimately remove the cap as the market matures. After a final consultation period ending in September, the framework is expected to pave the way for regulated stablecoins to launch in the U.K. by 2027, alongside broader crypto regulation.