The Bank of England has published its policy statement and draft Code of Practice for systemic stablecoin issuers, outlining the regulatory framework that will govern the development and operation of stablecoins in the UK.
The proposed regime is designed to support the growth of UK-issued stablecoins as trusted forms of digital money while maintaining financial stability and consumer protection. Policymakers believe stablecoins could improve payment efficiency by enabling faster, lower-cost and more flexible transactions, particularly for cross-border payments, while also supporting new forms of programmable financial services.
New Regulatory Structure Takes Shape
The policy statement incorporates feedback received during the Bank’s consultation process last year and forms part of a broader regulatory framework being developed jointly with the Financial Conduct Authority.
Together, the two regulators are working to establish an end-to-end supervisory regime that will allow firms to transition smoothly from non-systemic to systemic status as their stablecoin operations expand.
The framework is intended to provide regulatory clarity for firms operating in the digital asset sector while ensuring appropriate safeguards are in place as adoption increases.
Changes Made Following Industry Feedback
Following discussions with industry participants and other stakeholders, the Bank has amended several elements of its original proposals.
One significant change involves the composition of reserve assets backing systemic stablecoins. Under the revised framework, issuers will be permitted to hold up to 70% of reserves in interest-bearing assets, specifically short-term UK government debt, compared with the previously proposed limit of 60%. The remaining reserves must be held in central bank deposits.
The Bank said the adjustment reflects feedback received during the consultation process and is intended to balance financial stability objectives with operational flexibility for issuers.
Temporary Issuance Guardrail Introduced
The Bank has also opted to introduce a temporary issuance guardrail for systemic stablecoins rather than the holding limits proposed during the consultation.
Initially, the guardrail will be set at £40 billion for each systemic stablecoin issuer. The threshold will be reviewed periodically and removed once concerns relating to potential impacts on credit creation and financial stability have been sufficiently addressed.
Officials believe the measure provides a controlled pathway for the growth of stablecoin markets while broader risks continue to be assessed.
Industry Consultation Continues
Sarah Breeden, Deputy Governor for Financial Stability, said: “This is a major milestone in delivering greater choice and innovation in UK payments. 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. This is truly a world leading regime.”
The Bank of England plans to finalise the Code of Practice by the end of 2026, subject to feedback received during the consultation period, which runs until 22 September 2026.
Once the framework is completed, regulated stablecoins are expected to be able to operate within the UK under the new regime from 2027.
More about Stablecoin Regulation in the UK
Stablecoins are digital assets designed to maintain a stable value by being linked to traditional currencies or other low-volatility assets. Unlike more volatile cryptocurrencies, they are intended to function as reliable payment instruments and stores of value.
The UK’s proposed framework aims to ensure that systemic stablecoins meet standards comparable to other forms of money used in the financial system. By introducing requirements covering reserve assets, redemption rights, governance and risk management, regulators hope to encourage innovation while maintaining confidence in the broader payments ecosystem.
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