Bank of England Publishes Policy Statement and Draft Rules for Systemic Stablecoins

The Bank of England published its policy statement and draft Code of Practice for systemic stablecoin issuers on Monday, replacing the per-person holding caps it consulted on last year with an issuer-level issuance ceiling and a more generous reserve-asset mix. Industry feedback can be filed until 22 September.

The package, set out in the BoE's release and the accompanying policy statement on sterling-denominated systemic stablecoins, pairs a £40 billion temporary issuance guardrail for each designated coin with a backing-asset rule that allows up to 70% in short-dated UK government debt and at least 30% in unremunerated central bank deposits. The earlier consultation, published in November 2025, had floored the gilt share at 60% and proposed individual holding limits of around £20,000 per retail user.

Sarah Breeden, the BoE's Deputy Governor for Financial Stability, framed the package as the foundation of the regime. "This is a major milestone in delivering greater choice and innovation in UK payments," she said in the BoE's announcement. "Innovation thrives on trust. And today we've set out the foundations of that trust for a new form of money, with prompt redemption, strong protections and central bank support." Breeden flagged the same direction of travel in a City Week speech on 19 May.

How the regime designates a stablecoin as systemic

The framework sits on top of the Financial Services and Markets Act 2023, which extended the BoE's remit over financial market infrastructure to cover digital settlement assets. HM Treasury, not the BoE, formally recognises a payment system as systemic under the criteria in the Banking Act 2009, weighing whether design flaws or operational disruption could threaten UK financial stability. The BoE provides technical advice and supervises the designated coin once HMT pulls the trigger.

The carve-out is narrow by design. The Bank's regime will not cover stablecoins used for non-systemic purposes, such as the buying and selling of cryptoassets, which the BoE notes is the predominant use today. Those issuers stay with the Financial Conduct Authority, which is finalising its own rules for non-systemic issuance, custody and admission to trading. The two regulators are coordinating on a managed transition for firms that grow into systemic status.

What issuers have to hold, and what they can pay

The defining prudential rule is the backing-asset composition. Up to 70% of reserves can sit in short-dated UK gilts, with the remaining 30% held as unremunerated deposits at the Bank. Those central bank deposits exist to meet redemption requests promptly, and they are the structural reason a BoE-regulated stablecoin behaves like cash rather than a money-market fund. The gilt allocation is what makes the business model viable, since central bank deposits pay nothing.

Raising the gilt ceiling from 60% to 70% was the single biggest accommodation to industry feedback. The Bank said it supports more viable business models while preserving the ability to absorb outflows. Each systemic issuer faces a temporary £40 billion ceiling on coins in circulation, replacing the per-person caps that drew the loudest criticism in the consultation. The BoE will review the guardrail regularly and remove it once risks to bank-deposit credit provision are addressed.

Bloomberg reported that scrapping the holding limit was the change most sought by issuers during the consultation. Industry submissions had argued that retail caps would have made a UK-issued sterling stablecoin unworkable as a payments rail.

How it fits the global landscape

The UK is now the third major jurisdiction to lock in a binding stablecoin framework, after the EU's Markets in Crypto-Assets regulation and the US GENIUS Act era. MiCA, in force since 2024, applies an EU-wide passport to e-money tokens and asset-referenced tokens with a hard cap on non-euro stablecoin transaction volumes above certain thresholds. The US framework, most recently advanced through FDIC and OCC rulemakings under the GENIUS Act, splits supervision between federal and state regulators including NYDFS, which last month signed a supervisory MoU with the European Banking Authority.

The BoE's design choice differs from both. MiCA permits a wider range of reserve assets, including bank deposits at commercial lenders, while the US framework allows insured deposits as backing alongside Treasury bills. The UK's central-bank-deposit component is structurally tighter and gives the BoE direct visibility on issuer liquidity.

European Central Bank president Christine Lagarde has opposed any reliance on private euro stablecoins and pushed instead for the digital euro, putting the BoE somewhere between Frankfurt's reluctance and Washington's permissiveness.

Which issuers does it touch

Today's framework covers sterling-denominated coins. Dollar-pegged majors USDC, USDT and PYUSD fall outside the systemic regime as drafted, since they are not GBP-denominated and route their UK retail flows through FCA-supervised exchanges and custodians rather than as payment-system issuance. They remain subject to whichever non-systemic rules the FCA finalises this year.

The framework's first practical targets are the GBP-pegged contenders building toward UK retail payments distribution. None of these has yet been recognised as systemic by HM Treasury, which has to consult the BoE before any designation. The £40 billion guardrail also sets a clear ceiling at which the next conversation between issuer and regulator will happen.

Timeline and what isn't locked yet

Comment letters close on 22 September. The BoE intends to finalise the Code of Practice by the end of 2026, with regulated stablecoins permitted to operate from 2027. FCA final rules are expected alongside.

The remaining open questions sit on the FCA side: how a coin transitions from non-systemic FCA oversight to systemic dual supervision, and how the £40 billion guardrail will be calibrated against actual UK payments volumes once the regime turns on. The BoE has signalled the cap is provisional and will be reviewed as the market develops.