Bank of England sets draft rules for UK systemic stablecoins

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BOE draft UK stablecoin rules

Highlights

The Bank of England raised the allowable share of stablecoin backing assets held in short-term UK government debt to 70% from 60%, with the remainder in central bank deposits.
The central bank set an initial 40 billion pounds issuance guardrail per systemic stablecoin, replacing previously proposed holding limits, with regular reviews and future removal planned.
The Bank of England aims to finalize the draft Code of Practice by end-2026, targeting operational UK-regulated stablecoins from 2027, with the consultation open until 22 September 2026.

Draft regime outlines issuance and reserve rules

As reported by the Bank of England, the new policy statement and draft rules mark a key step in building the UK’s regime for systemic stablecoins. The central bank says the framework is intended to let UK-issued stablecoins develop as trusted forms of digital money while supporting safe innovation.

The package reflects feedback from last year’s consultation and is meant to give issuers clearer conditions for growth within a regulated structure. The Bank says stablecoins could support faster, cheaper and more flexible payment services, including cross-border uses and programmable features.

Among the revisions, the Bank raises the maximum share of backing assets that can be held in interest-bearing assets, defined as short-term UK government debt, to 70% from 60%. The remainder must be held in central bank deposits, which the Bank says will help issuers meet redemptions promptly.

The Bank also drops the temporary holding limits it consulted on last year and instead proposes a temporary issuance guardrail for each systemic stablecoin. That limit is initially set at 40 billion pounds and will be reviewed regularly, with removal planned once risks to credit provision have been addressed.

UK payments market prepares for 2027 launch

The Bank of England and the Financial Conduct Authority are continuing joint work on an end-to-end regime, including a managed transition for firms as they grow from non-systemic to systemic status. Further detail is due alongside the FCA’s final rules shortly.

Sarah Breeden, Deputy Governor for Financial Stability, says the measures are a major milestone in expanding choice and innovation in UK payments. She says the framework sets out the basis of trust for a new form of money through prompt redemption, strong protections and central bank support.

The Bank is seeking feedback on the draft Code of Practice until 22 September 2026 and intends to finalise it by the end of 2026. Supporting materials are due to follow, with regulated stablecoins expected to be able to operate in the UK from 2027.

Our previous coverage on stablecoin run risk explained how these tokens are increasingly embedded in market infrastructure, making a loss of confidence more likely to spill into traditional finance. We noted that if a major issuer faces heavy redemptions, it may be forced to liquidate reserve assets quickly—potentially amplifying stress in government bond markets and other core funding channels.

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