Bank of England updates its policy for UK systemic stablecoins

The Bank of England has released a policy statement on the UK’s regime for systemic stablecoins. It has revised some of the policies it proposed in last year’s consultation, including changing the composition of backing assets and replacing holding limits with a temporary overall cap on issuance size. The Bank is now consulting on rules for stablecoin issuers which it aims to finalise before the end of the year, with more materials to follow.

Prospective issuers should factor the Bank’s regime into their planning for the UK cryptoasset regulatory regime. Issuers that are initially regulated by the Financial Conduct Authority may find that, as their stablecoins are used more widely in UK payments, they become regulated by both the Bank and the FCA and will want to anticipate “cliff-edge” risks associated with that transition. Issuers that are not subject to the FCA regime (for example, because they are based outside the UK) could be brought into the Bank’s regime for systemic stablecoins and forced to localise in the UK if the stablecoins they issue meet the relevant tests for recognition.

UK banks should also continue to adhere to the Prudential Regulation Authority’s restriction on issuing stablecoins, at least in relation to retail consumers.

A framework for systemic stablecoins

In its policy statement, the Bank sets out its overall policy for overseeing systemic stablecoins and invites feedback on detailed rules in a draft Code of Practice. The regime focuses on sterling‑denominated stablecoins that are used for payments. The Bank also provides for regulating issuers of non‑sterling systemic stablecoins should their use become widespread in the UK.

The headline changes to its policy proposals are:

• Backing asset composition: Issuers will be able to hold 70% of their backing assets in short term UK government debt securities. Previously the Bank had suggested a 60:40 split between these interest-bearing assets and unremunerated Bank of England deposits. Temporary deviations from the 30% threshold will be permitted during stress events and issuers must notify the Bank if deposits fall below 25% for more than five consecutive business days or below 20% at any point.

• Issuance guardrail replacing holding limits: Systemic stablecoins will be subject to a temporary limit on the aggregate level of issuance per product. This guardrail, which will be set at an initial maximum of £40 billion, replaces the Bank’s previous policy limiting the amount that individuals and businesses could hold in stablecoins. The Bank will regularly review the guardrail and will remove it once it is satisfied that the risk to credit provision has been effectively mitigated. Dropping holding limits is likely a response to feedback that implementing them would be highly complex and, depending on how they were implemented, could have potentially imposed a significant burden on intermediaries.

Other key aspects of its policy remain largely unchanged but with some clarifications. These include:

• Capital and reserves: Issuers must meet minimum capital requirements, invest this capital in sufficiently liquid and high-quality assets, and notify the Bank when capital falls below 110% of the minimum requirement.

• Trust mechanism: Issuers must operate two trusts: one to protect coinholders' interests and one to cover the costs of returning value to coinholders. Excesses may be retained up to 5% of the stablecoin pool value in the backing asset pool, with no limit on excesses in reserves.

• Redemption: Coinholders must be able to redeem their stablecoins at face value at any time directly with the issuer. Issuers will have 24 hours to complete redemption requests and redemptions must be free of charge where possible and any fees must be fair, transparent and proportionate.

• Interest: Issuers may not pay interest to coinholders. This is intended to reinforce the principle that systemic stablecoins should primarily be used for payments and not as a means of investment or store of value. Activity-based rewards may be permitted if they do not arise from simply holding the stablecoin.

• Non-sterling stablecoins: The Bank will defer to the home authority’s framework for non-sterling systemic stablecoins where that framework delivers broadly similar outcomes and adequate cooperation arrangements are in place. In the policy statement the Bank gives some more detail on what it would look for when assessing a home authority’s regulation and supervision for this purpose. Key considerations will include the regime’s legal claim and redemption rights, redemption timelines and requirements relating to backing assets.

• Multi-issuance: The Bank does not consider multi-issuance models suitable for systemic use in the UK. Under these models, multiple legal entities subject to different regulatory regimes issue stablecoins that are meant to be fully fungible across borders. According to the Bank, issuers of such stablecoins could face fragmentation of their liquid backing assets in times of stress and not be able to move reserves fast enough to cover redemption demands. The EU is also reviewing how its cryptoasset regime deals with these models. 

• Subsidiarisation requirement: Any overseas issuers of sterling-denominated systemic stablecoins would need to set up a UK establishment. The Bank considers this the best way to mitigate risks to UK financial stability.

• Liquidity facility: The Bank will introduce a new backstop liquidity facility so that certain issuers could borrow against sterling-denominated UK government debt securities where private market channels are unavailable or insufficient, helping them to meet redemptions at par. The Bank will release further details in 2027.

Next steps

The consultation on the Bank’s rules in the draft Code of Practice closes on 22 September 2026. The Bank intends to finalise the Code of Practice before the end of the year.

In 2027, the Bank expects to consult on:

• draft guidance on the Code of Practice;

• updates to the Recognised Payment Systems Code of Practice;

• any supplementary disclosure and reporting requirements; and

• policy and rules on backing asset trust arrangements and failure/distribution rules.

The Bank will also publish a document with the FCA articulating a joint regulatory approach for regulating stablecoins. This will be particularly relevant for issuers assessing how they might transition from being regulated under the FCA’s framework to being jointly regulated by both the Bank and FCA.

Meanwhile the FCA is expected to release the final rules for its regulatory regime for stablecoins and other qualifying cryptoassets. HM Treasury is also due to consult on modernising UK payments regulation, which is expected to bring UK-issued stablecoins into scope of the payment services regime. Visit our UK cryptoasset regulatory regime webpage for more details.