Bank of England Updates Stablecoin Rules, Sets £40B Issuance Cap

The Bank of England has moved forward with a regulatory framework for “systemic” sterling stablecoins, publishing a policy statement and draft rules that spell out how regulated issuers would hold reserves and operate within the UK.

The BoE’s proposal targets stablecoins that are widely used in payments and could therefore pose risks to financial stability. HM Treasury will ultimately decide whether a given token falls under the systemic regime—an important distinction because only systemic coins would face the BoE’s new rulebook.

Key takeaways

• The BoE defines systemic stablecoins as widely used payment tokens that could create financial stability risks.
• Systemic issuers would be permitted to hold up to 70% of reserves in interest-bearing government debt, with the previous limit in the BoE’s earlier proposal raised from 60%.
• The earlier per-token issuance limits have been replaced by a temporary £40 billion issuance cap.
• The BoE intends to finalize the framework by end-2026 ahead of a planned 2027 rollout.
• Non-systemic stablecoins would remain under the Financial Conduct Authority, while systemic ones would be regulated under the BoE’s proposed regime.

Reserve “guardrails” adjusted as the BoE drafts systemic rules

In its policy statement, the central bank said systemic stablecoin issuers will be allowed to keep as much as 70% of their reserves in interest-bearing UK government debt—an expansion from the 60% limit that was previously floated. Alongside this change, the BoE replaced proposed holding limits with a different constraint: a temporary £40 billion issuance cap.

The BoE also indicated that the reserve-related “guardrail” would be reviewed regularly and removed once the risks to credit provision are addressed, according to the announcement published alongside the draft rules.

For UK stablecoin projects and payment providers, reserve composition and issuance limits are practical issues, not just compliance details. They can determine whether issuers can manage liquidity efficiently, how competitive sterling stablecoins can be versus alternatives backed by other currencies, and how easily new products can launch at scale.

Why the issuance cap matters for competition and tokenization plans

Katie Harries, Coinbase’s head of policy for Europe, said the UK’s approach is distinctive because it is the only country capping issuance of stablecoins in its own currency, based on her remarks shared with Cointelegraph.

Harries pointed to two unresolved questions that could shape whether the UK can capture the benefits it associates with stablecoin adoption: how “temporary” is intended to be in relation to the per-coin issuance cap, and whether stablecoins can be used for settlement in core wholesale markets—something she argued is essential for the UK’s tokenization ambitions.

Those points frame the central tension of the BoE’s draft: policymakers want to reduce the chance of large balance-sheet movements that could pull deposits away from the banking system, but stablecoin proponents want predictable, scalable rules that allow sterling-based tokens to function in real market plumbing rather than as isolated retail tools.

From per-token caps to a temporary £40 billion limit

The BoE’s new reserve and issuance approach replaces an earlier direction that emerged from a consultation launched in November 2025. That consultation proposed strict limits on how much value could be issued per stablecoin—for individuals up to £20,000 per token and for businesses up to £10 million per token.

According to the BoE’s earlier rationale, those limits were designed to prevent large-scale shifts of deposits out of the banking system. By limiting potential outflows, the central bank argued it could reduce the risk of diminished credit availability for households and businesses.

However, respondents warned that the restrictions could reduce day-to-day usability and create operational burdens for issuers. The BoE says its revised approach aims to preserve the same policy objective while allowing more unrestricted use by households and businesses.

ClearBank CEO Mark Fairless welcomed the shift away from what he described as a complex and restrictive holding-limits structure. In a statement shared with Cointelegraph, he called it a “positive step,” while adding that further progress is needed to ensure the regime does not constrain sustainable business models—particularly through the backing-asset requirements.

Separate regimes for systemic and non-systemic tokens

The proposed BoE framework is intended to apply only to stablecoins that are classified as systemic. Stablecoins that are not deemed systemic—such as tokens used mainly for crypto trading—would continue to fall under the Financial Conduct Authority’s supervision.

This split matters for market structure. It implies that the UK’s regulatory architecture will remain segmented, with the BoE focusing on potential macro-financial risks tied to payment usage and the FCA handling conduct and oversight for more trading-oriented stablecoins.

The BoE also said it has targeted a timeline that would bring a finalized rulebook by the end of 2026, ahead of a planned 2027 rollout. The central bank’s draft therefore functions as a near-term roadmap: stablecoin issuers considering sterling products can start planning around the expected systemic framework, while projects that do not meet the systemic threshold may not need the same level of BoE-linked reserve structuring.

Looking ahead, the key uncertainties for the market are how the “temporary” nature of the issuance cap will evolve and what it will practically take for stablecoins to integrate into wholesale settlement pathways—issues highlighted by industry figures as essential for the UK’s broader tokenization goals. As the BoE moves toward finalizing the rulebook, market participants will likely watch closely for any further adjustments to reserve requirements and the mechanics of how systemic status is determined.