Bank of England Caps Each Systemic Stablecoin at £40B

Bank of England Replaces Holding Limits

The £40 billion guardrail applies to total issuance by each systemic stablecoin, not to the combined market and not to each user. A household or company will not face a Bank-imposed cap on how many regulated systemic coins it can hold.

That is a material retreat from the 2025 proposal, which considered temporary limits of £20,000 per individual and £10 million per business. Industry groups argued that account-level controls would be expensive, intrusive and difficult to enforce across wallets and payment providers.

The Bank said an issuer-level ceiling can protect credit provision while allowing unrestricted use by households and businesses. Officials are concerned that a rapid shift from bank deposits into stablecoins could reduce the funding banks use to make loans.

Each systemically recognized coin can initially issue up to £40 billion. The Bank said it will review the guardrail regularly and remove it after risks to credit provision have been addressed, but it did not publish a fixed expiry date or automatic threshold for removal.

The scope is narrower than the headline may suggest. HM Treasury must first recognize a payment system as systemic under the Banking Act 2009, based on whether disruption could threaten financial stability or seriously affect UK businesses and users.

Tokens used mainly on crypto exchanges will remain under FCA supervision unless they grow into systemic payment infrastructure. That division follows the UK’s broader move toward regulated crypto access, including the FCA’s decision to permit limited crypto ETN exposure in retail funds while retaining product and risk controls.

Stablecoin Reserves Shift to 70% Gilts

Systemic issuers will be permitted to hold as much as 70% of their backing assets in short-term UK government debt with no more than six months remaining to maturity. At least 30% must remain in unremunerated deposits at the Bank of England.

The earlier proposal allowed 60% in gilts and required 40% at the central bank. Raising the interest-bearing share addresses industry warnings that keeping nearly half of reserves in non-interest-paying deposits could make a sterling stablecoin business commercially unviable.

The coins must remain backed one-to-one at all times. Valid redemption requests must be processed in real time where possible or by the end of the day, and issuers must pre-position enough liquidity to make those payments after completing anti-money-laundering and customer checks.

Issuers will also need capital covering at least six months of operating expenses or the higher cost of recovery and orderly wind-down plans. Separate liquid reserves held in trust must cover backing-asset risks and insolvency costs.

The full policy statement maintains a ban on issuers paying interest to coinholders. The Bank wants systemic stablecoins to function as payment money rather than interest-bearing substitutes for bank deposits, even though issuers may earn income from their gilt portfolios.

That structure concentrates the business model around reserve income and payment services. State Street’s work on a stablecoin reserve fund built from short-term government assets shows how reserve management is becoming a distinct institutional market as regulators specify which assets issuers can hold.

The Bank also plans a central bank liquidity facility for systemic issuers. It would serve as a backstop when an issuer cannot raise enough same-day cash from private markets without selling gilts at a discount, but access terms and operational details remain subject to further material.

UK Stablecoin Rules Target 2027 Launch

The Bank is accepting feedback on its policy statement and draft Code of Practice until September 22. It plans to finalize the code by the end of 2026 and said regulated stablecoins should be able to operate in the UK from 2027.

The FCA is developing the other side of the regime and has opened a stablecoin-focused regulatory sandbox cohort for firms testing issuance and custody models. A separate Bank-FCA publication is expected to explain how companies move from FCA-only supervision into joint oversight when they become systemic.

Implementation will determine whether the framework attracts a large sterling issuer. DefiLlama’s roughly £24 million of tracked GBP-pegged supply remains tiny beside dollar stablecoins, and the Bank did not name any company committed to launching at systemic scale.

The UK model also differs from the U.S. regime, where reserve, disclosure and customer-verification requirements are being implemented under the GENIUS Act. Daily Crypto Briefs previously examined how U.S. stablecoin KYC rules extend across wallets and intermediaries, while the Bank’s new package focuses on financial stability once a coin becomes important to payments.

Market sentiment remained defensive as the rules were released.

The next tests are the September consultation response, the FCA’s final rules, details of the central bank liquidity facility and the first issuer seeking systemic recognition. The £40 billion cap creates substantial room for growth, but the current sterling stablecoin market shows that regulation alone will not guarantee adoption.