Bank of England Publishes Draft Rules for Systemic Stablecoin Regulation

2026-06-24 · Regulation · QuoteReporter

Bank of England Publishes Draft Rules for Systemic Stablecoin Regulation

The Bank of England has released its policy statement and draft Code of Practice for regulating systemic stablecoins, marking a significant step in establishing the UK’s framework for digital money. The rules aim to balance innovation with financial stability, allowing stablecoins to operate as trusted payment instruments while mitigating systemic risks.

Policy Decisions

The Bank’s draft rules introduce several key regulatory adjustments following industry feedback. Notably, the share of interest-bearing assets (short-term UK government debt) that stablecoin issuers can hold has been increased from 60% to 70%, with the remaining 30% required to be held in central bank deposits to ensure liquidity for redemptions.

A significant change from earlier proposals is the introduction of a temporary issuance guardrail set at £40 billion per systemic stablecoin, replacing the previously considered holding limits. This measure is designed to protect credit provision in the economy while allowing unrestricted use by households and businesses. The guardrail will be reviewed periodically and phased out once risks are mitigated.

Deputy Governor for Financial Stability Sarah Breeden described the framework as "world leading," emphasising its focus on trust through prompt redemption safeguards and central bank backing.

Regulatory Framework and Scope

The regime applies only to sterling-denominated stablecoins deemed systemic by HM Treasury under criteria from the Banking Act 2009. Non-systemic stablecoins, including those used primarily for cryptoasset trading, remain under the sole supervision of the Financial Conduct Authority (FCA).

The Bank and FCA are coordinating to implement an end-to-end regulatory approach, including transition mechanisms for firms scaling from non-systemic to systemic status. Final FCA rules are expected shortly.

Market Implications

The regulatory clarity could accelerate adoption of UK-based stablecoins in payments and cross-border transactions. By permitting 70% allocation to short-term gilts, the rules may increase demand for UK government debt while maintaining stability through the 30% liquidity buffer.

The £40 billion issuance cap provides initial constraints but signals openness to scaling stablecoin use in the economy. This measured approach may reassure traditional financial institutions while fostering fintech innovation.

Next Steps

The Bank is accepting feedback on the draft rules until 22 September 2026, with plans to finalise the Code of Practice by end-2026. This timeline positions the UK to implement the regime in 2027, aligning with the government’s 2024 National Payments Vision.

Additional supporting materials will be published alongside continued collaboration with the FCA to ensure seamless regulatory coverage across the stablecoin ecosystem.