Bank of England: this week’s announcement follows a consultation launched in November last year | Credit: Ian HallThe Bank of England (BoE) has revised significant aspects of the UK’s first regulatory regime for stablecoins as it moves towards allowing regulated stablecoins to operate from 2027.
Stablecoins are cryptocurrencies designed to maintain a stable value by having their market value pegged to an external reference, typically fiat currency. The world’s two biggest stablecoins (by market capitalisation) are Tether and USD Coin (USBC) – both are, like most stablecoins, pegged to the US dollar. Just a small number are currently linked to the British pound.
The central bank opened a three-month consultation on revised proposals for a UK regulatory regime for sterling-denominated systemic stablecoins in November 2025 (the term ‘systemic’ stablecoins refers to those that are ‘widely used’ in payments and therefore may pose risks to UK financial stability, the consultation paper explained). Initial proposals were made two years previously.
It has this week (22 June) published a resulting policy statement and draft code of practice for sterling-denominated systemic stablecoins. Changes include scrapping proposed individual digital wallet caps – a relatively contentious proposal – with a temporary £40 billion issuance (about $52.8bn) limit per coin.
‘The framework supports safe innovation, enabling UK-issued stablecoins to develop as trusted forms of digital money,’ the BoE states in its announcement. ‘Alongside other innovations in money and payments, stablecoins could enable faster, cheaper and more flexible services for users, including cross‑border use cases, while supporting new programmable functionality.’
RELATED ARTICLE Bank of England opens consultation on UK regulatory regime for stablecoins – a news story (11 November 2025) on the launch of the consultation
On holding limits and backing assets
The BoE had proposed that issuers implement per-coin holding limits of £20,000 (about $26,400) for individuals and £10 million (about $13.2m) for businesses (with exemptions possible for larger businesses) – a plan that attracted criticism from many stablecoin advocates.
The central bank has instead decided to introduce a ‘temporary issuance guardrail’ for each systemic stablecoin, allowing each systemic stablecoin to be subject to an initial maximum issuance of £40 billion. Individuals and businesses will be able to use systemic stablecoins without limits on the size, frequency or type of transaction (other than where this is prevented by other legislation or regulatory requirements), the BoE explains.
The central bank states that it will ‘regularly review the guardrail, and we expect to loosen, and ultimately remove the guardrail once we are satisfied that the risk to credit provision has been effectively mitigated.’
The BoE has also revised its approach on backing assets (any stablecoin coin issuer will have the equivalent amount of backing asset, for example a specific fiat currency, saved somewhere and the person who holds it has the right to swap it for that amount whenever they want).
A maximum share that issuers will be able to hold in interest‑bearing assets – specifically, short-term UK government debt – has been slightly increased from 60 per cent to 70 per cent. The remainder must be held in non-interest-bearing central bank deposits.
‘These deposits enable issuers to meet redemptions promptly,’ the BoE states, adding that its re-think ‘supports more viable business models while still allowing issuers to deal with outflows.’
RELATED ARTICLE UK financial regulators urged to accelerate crypto rulemaking – a news story based on a panel discussion titled ‘Money Reimagined: Stablecoins And Digital Money For Smarter, Fairer Finance’ at an event in London on 21 October 2025
Breeden: ‘major milestone’
BoE deputy governor for financial stability Sarah Breeden described the newly revised regulatory architecture as “truly a world leading regime”, speaking of its publication as a “major milestone in delivering greater choice and innovation in UK payments.”
But the UK’s stablecoin- and crypto-related rulemaking is playing catch-up with other jurisdictions.
The European Commission is currently running a ‘targeted’ consultation (20 May to 31 August) on a review of the Regulation on the Markets in Crypto-Assets (MiCA – also known as MiCAR) – the European Union’s landmark crypto regulation, which came into full force in December 2024. In the US it is almost 12 months since president Donald Trump signed off the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) in July last year.
The BoE and Financial Conduct Authority (FCA) are working together to ‘deliver an end-to-end regime, including a managed transition as firms grow from non-systemic to systemic,’ the central bank states, adding that further detail will be published alongside the FCA’s final rules shortly.
The central bank intends to finalise the code of practice (rulebook for stablecoin issuers) by the end of 2026. It is now asking for feedback by 22 September on how well it reflects the BoE policy positions and whether there could be challenges with making it operational.
The regime will not cover stablecoins used for ‘non-systemic’ purposes, such as the buying and selling of cryptoassets, which is the predominant use of stablecoins at present. Those will be supervised solely by the FCA.
RELATED ARTICLE “There’s a case for stablecoins across all government departments…” – an article based around a speech titled ‘Why the UK Public Sector Should Embrace Stablecoins’ given by Lord Holmes at an event on 26 June 2025
Mixed reaction
The revised plan has met with a mixed response.
“Despite some positive changes in response to industry feedback, the Bank of England’s approach still risks creating the most conservative and cautious stablecoin regime in the world,” said Janine Hirt, chief executive of Innovate Finance, adding that the UK fintech trade body wants to “continue to work with the Bank of England to help refine these proposals.”
“Widespread adoption of stablecoins in financial markets is critical to maintaining the competitiveness of UK wholesale financial markets and in the wider economy can enable significant cost savings and productivity gains for businesses and families,” Hirt explained. “The ability of the UK to benefit from these and to attract investment will be hampered by the Bank of England approach which is more cautious than not only the US, Singapore and UAE but also the EU and Canada.”
She praised the re-think on what she described as the “unworkable proposals for demand-side limits” on how much each person and business can hold. But warned that the “new limit on supply that will be introduced instead could hold back Britain’s plans for tokenisation of wholesale capital markets, which will potentially see significant trading volumes, and could create instability in the market if demand exceeds supply.”
Hirt also criticised the requirement for 30 per cent of backing assets to be held at the BoE (earning no return), saying that this “removes a third of the potential revenue for service providers and issuers and means that firms in the UK would have to develop entirely different business models compared to the rest of the world.”
RELATED ARTICLE BoE to assess stablecoins’ role in wholesale payments through Digi Securities Sandbox – a news story (4 July 2025) on a speech in which executive director of financial market infrastructure Sasha Mills said the central bank would “consider” stablecoins’ role in wholesale financial markets innovation through the BoE/FCA Digital Securities Sandbox
‘Big step in right direction’
Lord Ed Vaizey and Gurinder Singh Josan MP, co-chairs of the crypto and digital assets all-party parliamentary group (APPG) in the UK Parliament, welcomed the decision to remove the proposed holding limits.
“This is a significant and positive step forward for the UK’s digital assets sector and one that will be welcomed by businesses, investors and innovators across the industry,” they said in a joint media release.
“The APPG has consistently raised concerns that the proposed limits risked putting the UK out of step with other major international markets and could have held back the development of a competitive UK stablecoin market. It is encouraging to see the Bank listening to feedback from industry and Parliament and adapting its approach,” they said.
Overall they described the announcement as a “big step in the right direction and send[ing] a positive signal that the UK is serious about competing in the global digital assets market.”
In October last year Vaizey urged the government to reconsider proposed limits on how much stablecoin individuals can hold, reiterating the call in November after the consultation’s launch.
RELATED ARTICLE Stablecoin market ‘clamouring’ for regulatory certainty amid ongoing ‘stigma’ – a report from an event in London (‘Stablecoin Symposium’ on 18 March 2025)
Lords committee scrutiny
The House of Lords financial services regulation committee published a report earlier this month (3 June) titled ‘Stablecoins: waiting for regulation’.
The publication of the 71-page report followed an inquiry, which got underway in January, into the growth and proposed regulation of stablecoins in the UK.
“The global stablecoin market is dominated by US dollar stablecoins and evolved to serve cryptoasset trading. New uses for stablecoins are emerging and regulators globally are setting up regulatory regimes. The UK is lagging behind compared with the US and the EU but is now moving in the right direction,” the committee’s chair, Baroness Noakes, said upon the report’s publication.
“No-one knows whether or how a UK-based stablecoin market could develop,” she continued.
“Regulation needs to allow innovation while ensuring that risks are effectively mitigated. The shape of any UK stablecoin market will be strongly influenced by the direction of the regulatory regime, and so it is important that the regulators get this balance right,” she said.
RELATED ARTICLE ‘Biased, confusing, used inconsistently…’: fintech terminology dissected in ECB paper – a news story (17 March 2025) on a 49-page European Central Bank (ECB) working paper (‘Digital money and finance: a critical review of terminology’) in which the authors stated that ‘public sector institutions have a responsibility to help the public understand new technologies within the scope of their mandates’ – and that ‘sound terminology is the very basis for this’ (‘stablecoin’ was among the terms criticised)
BIS: financial stability worries
The Bank for International Settlements (BIS), meanwhile, takes a naturally cautious tone towards stablecoins.
A special chapter (‘Anchoring trust in money: innovation beyond stablecoins’) – released this week (23 June) – from its Annual Economic Report 2026 assesses evolving forms of financial architectures based on programmable platforms and different instruments that provide money-like functions.
Stablecoins ‘display some of tokenisation’s potential to support faster, programmable payments,’ the BIS states. But it asserts that stablecoins’ ‘current form […] falls short on key properties of money and has structural flaws’ and their ‘widespread adoption could affect macroeconomic and financial stability.’
‘Advancing the future monetary system requires global coordinated efforts by policymakers along two main dimensions: tackling weaknesses in current stablecoin arrangements to mitigate risks and bringing the technological advances of tokenisation into the two-tier system,’ the Switzerland-based institution argues.
The full BIS Annual Economic Report 2026 (and BIS Annual Report 2025/26) will be published on 28 June.