Bank of England Eases Stablecoin Rules and Sets £40B Issuance Cap

Key Takeaways:

• The Bank of England introduces a temporary £40 billion cap on sterling stablecoin issuance.
• Systemic stablecoins may now hold up to 70% of reserves in UK government debt, easing earlier restrictions.
• The UK aims to finalize its stablecoin rulebook by the end of 2026 for rollout in 2027.

The Bank of England has released a new policy statement and draft rules for systemic pound-backed stablecoins in the United Kingdom. The updated framework defines systemic stablecoins as digital assets widely used in payments that could pose risks to financial stability. Under the revised approach, the decision to classify a stablecoin as systemic will rest with HM Treasury.

Higher Reserve Flexibility and Issuance Cap

The central bank has eased earlier restrictions by allowing issuers to hold up to 70% of reserves in interest-bearing UK government debt, up from 60% in the previous proposal. At the same time, a temporary £40 billion ($52.8 billion) issuance cap has been introduced, replacing earlier holding limits. The BoE said this safeguard will be reviewed regularly and removed once risks to credit supply are addressed.

Industry Response and Future Outlook

Industry participants welcomed the more flexible approach. Coinbase’s policy head for Europe noted that the UK remains the only jurisdiction introducing a direct issuance cap on stablecoins. Meanwhile, ClearBank CEO Mark Fairless said the shift reflects a more proportionate framework but warned that further clarity is needed on reserve rules. The UK aims to finalize its stablecoin rulebook by the end of 2026, ahead of a full rollout in 2027, while non-systemic stablecoins will remain under Financial Conduct Authority oversight.