Bank of England Stablecoin Rules: 70% Backing Cap and a £40 Billion Issuance Guardrail

The Bank of England raised the maximum share of backing assets a systemic stablecoin issuer can hold in interest-bearing assets, specifically short-term UK government debt, from 60% to 70% today, with the remainder held in central bank deposits that issuers use to meet redemptions promptly.

The policy statement also confirms a £40 billion issuance guardrail will apply to each systemic stablecoin instead of the holding limits the Bank of England originally consulted on, a change the Bank of England says protects credit availability in the economy while being simpler to administer. Both decisions appear in the policy statement and draft Code of Practice for systemic stablecoin issuers the Bank of England published today, marking a milestone in establishing the rules that will govern how the largest stablecoins operate inside the United Kingdom (UK) once the regime takes effect in 2027.

The Bank of England is working with the Financial Conduct Authority (FCA) to deliver what both regulators describe as an end-to-end regime, including a managed transition path for stablecoins as they grow from non-systemic to systemic status. The FCA's own final rules will follow shortly, completing the other half of the framework.

What changed from last year's consultation

Both decisions announced today are direct revisions to proposals the Bank of England consulted on last year, following what the Bank of England describes as extensive engagement with industry and stakeholders. The backing asset change, raising the interest-bearing share from 60% to 70%, gives issuers more room to generate yield on reserves while the Bank of England maintains that the central bank deposit portion remains sufficient for issuers to meet redemption demands without delay.

The issuance guardrail replaces a different policy tool entirely. The original consultation proposed temporary holding limits, restricting how much of a systemic stablecoin individual households and businesses could hold. The Bank of England dropped that approach in favour of a single issuance ceiling, initially set at £40 billion per systemic stablecoin. Households and businesses can use the stablecoin without restriction under the new approach, and the Bank of England states the guardrail will be reviewed regularly and removed once risks to credit provision have been addressed, framing it as temporary infrastructure rather than a permanent constraint.

Why credit access is the variable being protected

The logic behind both decisions traces back to a structural concern that runs through stablecoin regulation globally: large-scale movement of money out of bank deposits and into stablecoins could reduce the funds banks have available to lend. Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, said the framework establishes the foundations of trust for a new form of money, anchored in redemption speed and central bank backing, and described the result as a world-leading regime.

The £40 billion guardrail is the Bank of England's answer to that concern at the issuer level rather than the user level. Capping how much a systemic stablecoin can issue in total limits the maximum scale of deposit substitution any single token can cause, without requiring the Bank of England to police individual household or business holdings. A per-issuer ceiling is far less disruptive to everyday use than a per-user limit would have been.

How this fits the wider stablecoin regulatory picture

The UK's approach sits alongside parallel efforts elsewhere to address the same underlying risk through different mechanisms. The stablecoin spillover effects documented in BIS research show how stablecoin flows can move traditional currency markets, a risk that backing asset composition and issuance caps are partly designed to contain at the source. The European Central Bank's warnings about dollar-denominated stablecoins cementing dollar dominance reflect a related concern: which currency a systemic stablecoin's reserves sit in shapes monetary influence as much as financial stability.

The UK's choice to anchor backing assets in short-term government debt and central bank deposits, rather than commercial bank deposits or foreign assets, keeps systemic stablecoin reserves inside instruments the Bank of England directly oversees. That design gives UK regulators a degree of visibility into systemic stablecoin reserves that frameworks built around private bank deposits do not offer.

What happens between now and 2027

The Bank of England is accepting feedback on today's policy statement and draft Code of Practice until September 22, 2026. The Bank of England intends to finalise the Code of Practice by the end of 2026, with further supporting materials to follow alongside continued joint work with the FCA. Regulated stablecoins would become operational in the UK from 2027 under this timeline.

The three-month comment window gives fintech firms building toward systemic scale a defined runway to plan against, rather than a moving target. Today's policy statement settles the specific mechanics governing systemic stablecoins in the UK: a higher yield allowance balanced against an issuance ceiling, calibrated so growth and financial stability move forward together rather than as competing goals.

Editor's note

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