The Bank of England published a revised draft framework for systemic stablecoins, introducing changes to reserve management and issuance requirements ahead of the United Kingdom's planned 2027 regulatory rollout. The updated proposals increase the permitted reserve allocation in UK government securities to 70% from 60% and replace previous holding limits with a temporary £40 billion issuance cap per stablecoin. The central bank plans to finalize the framework by the end of 2026. The revisions respond to industry feedback that earlier restrictions could hinder adoption and reduce global competitiveness. The framework aims to balance digital payment innovation with financial stability oversight for stablecoins that achieve widespread payment adoption in the UK.
Bank of England Increases Reserve Allocation to 70% and Sets £40 Billion Issuance Cap
Under the latest draft, issuers of systemic stablecoins will be permitted to hold up to 70% of their reserves in interest-bearing UK government securities, an increase from the 60% limit outlined in the previous proposal. The central bank has also replaced earlier plans for individual and business holding limits with a temporary issuance cap of £40 billion, equivalent to approximately $52.8 billion, for each stablecoin. According to the BoE, the cap will undergo periodic reviews and could eventually be removed once potential risks to credit markets are considered manageable.
The Bank of England classifies systemic stablecoins as digital assets that achieve widespread payment adoption and could potentially affect the stability of the UK's financial system. As a result, these assets will be subject to stricter supervision than non-systemic stablecoins, which will continue to fall under the jurisdiction of the Financial Conduct Authority.
Industry Feedback Prompts Removal of Individual and Business Holding Limits
The updated approach marks a shift from the BoE's November 2025 consultation draft, which proposed limiting individual holdings to £20,000 and business holdings to £10 million. Industry participants had argued that those restrictions could significantly hinder adoption and reduce the global competitiveness of UK-issued stablecoins.
Following consultations with digital asset firms and market participants, the central bank adopted a more flexible regulatory model intended to balance innovation with prudent oversight. The Bank of England plans to finalize the regulatory framework by the end of 2026, creating the foundation for its anticipated implementation in 2027.
Stakeholders Call for Further Refinements to Reserve and Issuance Requirements
ClearBank Chief Executive Officer Mark Fairless indicated that the central bank had responded positively to concerns surrounding holding limits by moving toward a more proportionate regulatory model. At the same time, he suggested that further adjustments would be beneficial to prevent unnecessary constraints on sustainable business models, particularly regarding reserve asset requirements.
The regulatory revisions follow earlier remarks from Deputy Governor Sarah Breeden, who acknowledged that overly conservative policies could place UK stablecoins at a disadvantage compared with US dollar-backed alternatives. The BoE continues to prioritize limiting large-scale deposit movements from traditional banks into stablecoins, as such shifts could reduce credit availability and create instability within sterling money markets.
Katie Harries, Coinbase's Head of Policy for Europe, observed that the United Kingdom remains the only country imposing an issuance cap on stablecoins denominated in its own currency. She questioned the temporary nature of the limit and emphasized the importance of allowing stablecoins to facilitate core wholesale market transactions if the country hopes to achieve its broader tokenization objectives.
FAQ
What did the Bank of England change in its revised stablecoin framework?
The Bank of England increased the permitted reserve allocation in UK government securities to 70% from 60% and replaced previous individual and business holding limits with a temporary £40 billion issuance cap per stablecoin. The central bank plans to finalize the framework by the end of 2026 for implementation in 2027.
Why did the Bank of England remove the holding limits proposed in November 2025?
Industry participants argued that the earlier restrictions—limiting individual holdings to £20,000 and business holdings to £10 million—could significantly hinder adoption and reduce the global competitiveness of UK-issued stablecoins. Following consultations, the central bank adopted a more flexible regulatory model.
