Catenaa, Wednesday, June 24, 2026- The Bank of England has unveiled a revised regulatory framework for systemic sterling-denominated stablecoins, dropping previously proposed holding restrictions and introducing a temporary £40 billion ($52.9 billion) issuance cap for each stablecoin as the United Kingdom moves closer to establishing a formal digital payments regime.
The central bank said the new framework is designed for sterling-backed stablecoins that become widely used in payments and could pose risks to financial stability if disrupted. Under the revised approach, systemic issuers will be supervised by the Bank of England, while non-systemic stablecoins primarily used for crypto trading activities will remain under the oversight of the Financial Conduct Authority.
The revised rules loosen earlier reserve requirements proposed in late 2025.
Systemic stablecoin issuers will now be permitted to hold up to 70% of reserve assets in short-term UK government debt with maturities of six months or less. The remaining 30% must be maintained as non-interest-bearing deposits at the Bank of England.
The previous proposal would have limited government debt holdings to 60% while requiring 40% of reserves to be kept at the central bank.
The Bank of England said the revised structure seeks to balance safety, liquidity and operational efficiency while ensuring stablecoins remain fully backed.
The framework also introduces strict redemption requirements.
Issuers must process redemption requests as quickly as possible and within 24 hours after receiving a complete request. A request is considered complete only after identity verification checks are finalized and the corresponding tokens have been received by the issuer.
The central bank said reserve assets must be held through trust arrangements designed to protect coin holders both during normal operations and in the event of issuer failure.
Issuers will also be required to maintain capital equivalent to either six months of operating expenses or the projected cost of recovery and orderly wind-down plans, whichever is higher.
The Bank of England confirmed that systemic stablecoin issuers will not be allowed to pay interest on customer holdings.
However, firms may continue offering activity-based incentives or other non-interest rewards provided they remain consistent with stablecoins functioning primarily as payment instruments rather than investment products.
The restriction aligns with concerns among central banks that interest-bearing stablecoins could compete directly with traditional bank deposits and potentially affect monetary transmission mechanisms.
The proposals received a generally positive reaction from industry participants.
According to Coinbase’s European policy leadership, the framework creates one of the most robust stablecoin regulatory environments globally through its reserve standards, capital requirements, central bank deposit access and liquidity safeguards.
However, industry observers raised questions regarding the temporary nature of the £40 billion issuance cap and whether it could eventually constrain market growth.
Some also highlighted uncertainty surrounding the role of stablecoins in wholesale financial market settlement systems, an issue viewed as important for the UK’s broader ambitions in tokenization and digital asset infrastructure.
The Bank of England will accept industry feedback on the draft code of practice until Sept. 22.
Following the consultation period, the central bank plans to finalize the framework by the end of 2026. Recognized systemic sterling stablecoin issuers would then be able to begin operating under the new regime in 2027.
The announcement represents another step in the UK’s effort to establish itself as a leading regulated digital asset hub while maintaining safeguards around financial stability and consumer protection.
Stablecoins are digital tokens designed to maintain a fixed value by being backed by reserve assets such as government securities, bank deposits or cash equivalents. They have become a core component of the cryptocurrency ecosystem, facilitating trading, payments and cross-border transactions.
Regulators worldwide have intensified efforts to establish oversight frameworks following the rapid growth of stablecoin markets and concerns about reserve transparency, redemption risks and potential systemic effects. The United Kingdom has been developing a dedicated regulatory regime for sterling-backed stablecoins as part of its broader digital finance strategy.
The Bank of England’s latest proposals signal a shift toward accommodating larger-scale stablecoin issuance while preserving strong prudential safeguards. The framework also reflects increasing recognition among policymakers that stablecoins could play a role in future payment systems, provided risks are appropriately managed.
