BoE eases stablecoin rules, sets £40bn issuance cap

The Bank of England published final policy and a draft rulebook on Monday, removing planned caps on how much of a sterling-backed stablecoin any one person could hold and imposing a temporary £40 billion issuance limit per systemic coin. The central bank said the cap is intended as a short-term safeguard to protect bank deposits and credit flows; it will be reviewed regularly and removed once risks to lending have receded.

Under the revised reserve rules, issuers may place up to 70% of backing assets in short-term UK government debt, up from a proposed 60%. The remaining reserves must sit in non-interest-bearing deposits at the Bank of England. Firms had argued the earlier split left too much capital earning nothing and pushed for a higher share of yield-bearing securities to make sterling-backed offerings viable.

The regime covers only ‘systemic’ stablecoins that are used widely in payments and could pose risks to financial stability. Tokens used mainly to trade cryptoassets will remain under the supervision of the Financial Conduct Authority. The Bank said the £40 billion ceiling will not restrict ordinary households and businesses using stablecoins for payments.

The Bank has opened a consultation on the draft rules and is taking feedback until Sept. 22. Officials aim to finalise the framework by the end of 2026 and expect the regulated market for systemic stablecoins to be able to operate in the UK from 2027, provided remaining rulemaking and supervisory preparations proceed as planned.

Sarah Breeden, deputy governor for financial stability, described the package as a ‘world leading regime’ that supports ‘prompt redemption, strong protections and central bank support’ and added ‘Innovation thrives on trust.’

Sasha Mills, executive director of financial market infrastructure, noted the Bank is treating stablecoins ‘as a new form of money’ and expects to accept applications from systemic issuers by the end of the year.

Industry lobbying influenced several relaxations in the final text after firms warned early proposals could harm the nascent sterling-backed market. In May, Bank officials acknowledged the initial approach may have been overly conservative and signalled a review of holding limits and reserve composition to keep the UK competitive with US and European frameworks.