The Bank of England has finalized its long-awaited framework for systemic sterling-denominated stablecoins, introducing significant changes from proposals first outlined in late 2025.
Most notably, the central bank abandoned plans to limit how much stablecoin individuals and businesses could hold. Instead, it will impose a temporary issuance cap of £40 billion per systemic stablecoin, a move widely viewed as more practical for supporting adoption and innovation.
Bank of England Shifts Approach on Stablecoin Restrictions
The original proposal would have limited individual stablecoin holdings to £20,000 and business holdings to £10 million. Industry participants argued the restrictions would be difficult to implement and could discourage both institutional participation and real-world use cases.
After reviewing consultation feedback, the Bank of England opted for a different strategy.
Under the revised framework, individuals and businesses will be able to use systemic stablecoins without limits on transaction size, transaction frequency, or the amount they hold. Instead, each systemic stablecoin will be subject to a temporary issuance guardrail initially set at £40 billion.
According to the Bank, the issuance cap is intended to address concerns that rapid migration of deposits from traditional banks into stablecoins could affect lending activity and credit availability across the UK economy.
The central bank said the guardrail will be reviewed regularly and could eventually be relaxed or removed once risks to credit provision have been adequately addressed.
Reserve Requirements Become More Flexible
The Bank of England also softened its rules regarding reserve composition.
Under the final framework, issuers can hold up to 70% of backing assets in short-term UK government debt securities, up from the previously proposed 60%.
The remaining 30% must be held as non-interest-bearing deposits at the Bank of England.
Regulators said the adjustment reflects feedback from industry participants who argued that larger allocations to government securities would make sterling stablecoin business models more viable while preserving strong liquidity protections.
The framework still requires stablecoins to maintain one-to-one backing and support prompt redemption requests.
The Bank also confirmed plans to provide systemic stablecoin issuers access to a Central Bank Liquidity Facility, which will serve as a liquidity backstop during periods of market stress.
Focus on Systemic Stablecoins
The new framework applies specifically to what regulators classify as systemic stablecoins, digital assets large enough or interconnected enough to potentially affect UK financial stability.
These stablecoins will be jointly supervised by the Bank of England and the Financial Conduct Authority once recognized as systemic by HM Treasury.
Non-systematic stablecoins will continue to fall primarily under the Financial Conduct Authority’s regulatory framework.
The Bank expects stablecoins to play an increasing role across several payment use cases, including:
- Person-to-person transfers
- Merchant payments
- Online purchases
- Cross-border transactions
- Future digital asset settlement applications
Officials believe stablecoins could offer faster settlement speeds, lower payment costs, and greater programmability compared with some traditional payment methods.
Industry Receives Greater Regulatory Clarity
The final framework marks one of the UK’s most significant digital asset policy developments to date.
Deputy Governor for Financial Stability Sarah Breeden described the announcement as a key milestone for the country’s payments ecosystem.
“This is a major milestone in delivering greater choice and innovation in UK payments. Innovation thrives on trust. And today we’ve set out the foundations of that trust for a new form of money, with prompt redemption, strong protections and central bank support.
Sarah Breeden
Deputy Governor for Financial Stability – Bank of England
The Bank plans to finalize its Code of Practice by the end of 2026, while additional implementation measures are expected during 2027.