In setting out its policy decisions and draft rules, the BoE has taken into account both the stakeholder feedback to its November 2025 consultation and the recommendations of the House of Lords Financial Services Regulation Committee (FSRC) in its report on the regulation of stablecoins issued earlier in June.
On what have proved to be the two particularly contentious areas of backing assets and holding limits, stablecoin issuers should be pleased to see that sustained industry lobbying has ensured the BoE remains open to further changes in the interests of business model viability, market competition and operational practicality. While maintaining its overarching focus on financial stability, the BoE’s revised policy now provides for:
backing asset composition of 70/30 (previously 60/40), meaning that issuers will be able to hold 70% of backing assets in short-term UK government debt and 30% in unremunerated BoE deposits; and
replacement of the per-coin holding limits for individuals and businesses with a (much simpler to implement) temporary guardrail on the level of issuance per systemic stablecoin product, initially set at a maximum issuance of £40bn.
The BoE has also clearly had an eye to viability of issuer business models and strengthening the overall competitiveness and attractiveness of the systemic regime in making other, clarificatory changes to its policy positions – for example in its clarification of the distinction between the prohibition on interest or returns linked to the holding or retention of stablecoins, and permitted activity-based rewards such as those linked to payments or transaction activity.
Likewise, issuers should welcome the fact that the BoE is seeking to reduce regulatory friction by aiming at alignment with the FCA’s non-systemic regime where appropriate, eg in relation to safeguarding requirements (with more detail in the recently published Approach to Joint Regulation document which is also open for consultation – see our separate article).
The BoE makes specific reference to the fact that its regulatory approach reflects many of the recommendations made in the FSRC’s report, including ensuring that it sticks to pre-committed timelines. There are, however, a number of loose ends still in need of tying up before the regime go-live in 2027, including finalising the joint BoE/FCA regulatory approach on non-systemic to systemic transitions as well as planned consultations on numerous supporting materials. This could suggest a degree of pressure to push ahead with a partially developed regime, although in some respects it is also indicative of the novel and fast-evolving nature of the digital assets sector which necessitates a dynamic, iterative approach as use cases and related business models develop.
The BoE is looking for any further feedback on its policy statement, draft rules and their future implementation, with an emphasis on financial stability, commercial, and operational considerations. Stakeholders should therefore take this opportunity to review and respond to the revised policy positions and draft rules before the 22 September 2026 deadline. They will need to consider these publications alongside the BoE/FCA Approach to Joint Regulation document (open for consultation until 30 September 2026 – see our separate article) and the FCA’s final rules for its non-systemic stablecoins regime in its policy statement PS26/10 (see our separate article).
What are the key changes from the November 2025 consultation proposals?
Backing assets: revised 70/30 composition
In response to stakeholder feedback, and recalibrating the severity of risks, the BoE has revised the backing asset composition from 60/40 to 70/30, meaning that issuers will be able to hold70% of backing assets in short-term UK government debt and 30% in unremunerated BoE deposits, consistent with historical liquidity risk events. This will apply in steady state, so under the step-up approach ‘systemic at launch’ firms will be able to hold up to 95% of their backing assets in UKgovernment debt securities as they scale.
UK government debt securities with a residual maturity of up to 6 months will be permitted.
Both overnight repo and reverse repo with sterling-denominated UK government debt securities of 6 months or less maturity will be permitted.
Contrary to stakeholder feedback, however, deposits at the central bank will remain unremunerated. The BoE explains that this is consistent with stablecoins used as payment instruments, not a store of value, and that the step-up approach is designed to provide sufficient flexibility to support business model viability from the outset.
The stakeholder call for a broader set of eligible assets has also been rejected due to the additional financial risks they would introduce to systemic stablecoins. This includes commercial bank deposits.
Issuers must maintain the one-to-one backing asset requirement at all times, and use best endeavours to maintain the central bank deposit requirement.
The BoE has also provided further detail on its expectations of issuers’ liquidity risk management frameworks. Issuers will be required to maintain a backing assets risk management framework and a liquidity contingency funding plan setting out how they will address stress, including a market stress which may impact the number of redemptions or a shortfall against the 30% central bank deposit requirement.
Holding limits replaced by temporary issuance guardrail
Again in response to feedback, the BoE has dropped the idea of implementing the per-coin holding limits for individuals and businesses that it consulted on in November 2025.
While the BoE’s underlying objective remains the same – the desire to mitigate the risk of deposit outflows and consequent aggregate risk to credit flows – its proposed tool to manage those risks is more proportionate. There will instead be a (much simpler to implement) temporary guardrail on the level of issuance per systemic stablecoin product, initially set at a maximum issuance of £40bn. This means that individuals and businesses will be able to use systemic stablecoins without limits on the size, frequency or type of transaction (subject to other legislative or regulatory requirements).
As the guardrail will be a transitional measure, it will be subject to regular review and will be loosened and ultimately removed by revoking the Temporary Issuance Guardrail Part of the draft Code of Practice once the BoE is satisfied that the risk to credit provision has been effectively mitigated.
There is acknowledgement that the issuance guardrail introduces a new ‘de-pegging’ risk if the demand for a stablecoin outweighs supply and pushes secondary market prices above par value. However, the BoE considers this risk to be manageable, given that a sustained, large‑scale flow into a systemic stablecoin would likely be needed for de-pegging to occur.
The draft Code of Practice sets out the BoE’s expectation that if an issuer breaches, or is reasonably expected to breach, the temporary issuance guardrail requirement it must notify the BoE as soon as possible with the details of the relevant systemic stablecoin product and product total, and submit a plan of the steps it will take, and the timeline, for returning to compliance.
The BoE also plans to introduce requirements for record-keeping to enable issuers to monitor and demonstrate compliance with the temporary issuance guardrail.
What are some of the policy clarifications that have been made?
Capital, liquid assets and reserve requirements
The CPMI-IOSCO Principles for Financial Market Infrastructure (PFMIs) will continue to be used as the baseline for capital requirements for general business risk of systemic stablecoin issuers. However, the BoE’s approach has been updated to reflect the supplementary guidance in the CPMI-IOSCO consultative report on further guidance to the PFMI for general business risk and general business losses management (CPMI-IOSCO guidance) and to avoid duplication of resources where capital and reserves would otherwise be held against similar risks.
Capital requirements will be applied proportionately for firms that are designated ‘systemic at launch’ and are subject to the proposed step-up approach (see further below).
In recognition of the challenges identified by some consultation respondents relating to measuring novel risks such as smart contract vulnerabilities and ledger failures, issuers must notify the BoE when their capital falls below 110% of the minimum requirement. The notification threshold has been calibrated to ensure that systemic issuers maintain the ability to recover and wind down in an orderly manner at all times.
To promote consistency between issuers’ capital and reserve calculations, the BoE will require systemic stablecoin issuers to conduct an overall risk assessment to identify, monitor, measure and mitigate risks. This must be supported by robust systems and processes, strong governance, appropriate documentation, and notification requirements.
Regarding the requirement that issuers must maintain reserves of liquid assets under two statutory trust arrangements to protect coinholders against losses arising from financial risks to the backing assets and from issuer failure or insolvency, the BoE has updated the financial risk reserve to capture risks arising from repurchase and reverse repurchase transactions of the short-term UK government debt held as backing assets. It has also added a new component to cover the counterparty credit risk arising from such reverse repurchase transactions, and provided further clarity on what is included in the wind-down reserve.
It remains the BoE’s policy that the issuer’s capital, assets funded by capital, and reserves of liquid assets held for financial risk and insolvency/wind-down risk must be held in the UK.
Safeguarding and trust arrangements
The BoE has sought to align its safeguarding requirements with the FCA’s for issuers of qualifying stablecoin where possible. The Approach to Joint Regulation document with the FCA addresses alignment, transitional and joint regulation issues in further detail (see our separate article).
Subject to it being given enabling powers under legislation (to which HM Treasury has agreed in principle), the BoE will proceed with a statutory trust arrangement for its safeguarding requirements. This is a point of alignment with the FCA which should help to reduce friction for issuers transitioning from the non‑systemic to the systemic regime.
As previously proposed, there will be two trusts: (i) a trust over backing assets and the financial risk reserve for each systemic stablecoin product and (ii) a trust over the wind-down reserve.
The BoE expects that issuers will be able to use trust assets to access the new Central Bank Liquidity Facility (see further below), and will consider consequential amendments to the Safeguarding Part of the draft Code of Practice.
Issuers will be allowed to retain up to 5% of the value of the stablecoin pool, defined as coins in issuance, including coins that have been redeemed but not yet burned, as excess in the backing asset pool. There will be no limit of the value of the excess that can be kept in the financial risk reserve or the wind-down reserve.
Issuance, legal claim and redemption
Clarity is provided on the different elements of the redemption process, including the timeframe to complete redemption requests. Here, the BoE has maintained its expectation that issuers should be able to complete requests in real time or, at the latest, by the end of the business day. However, in acknowledgement of payment system interaction and operational challenges, it proposes to require redemption requests to be processed as soon as practicable, and in any event within 24 hours of receipt of a ‘full redemption request’. This is closer to the FCA’s proposed redemption timeframe in CP25/14 (Stablecoin Issuance and Cryptoasset Custody – May 2025).
A redemption request will become a ‘full redemption request’ when issuers receive: (i) the redemption request; (ii) have completed AML/KYC checks in line with appropriate requirements; and (iii) are in receipt of the coins in their wallet from the coinholder making the request. This is in response to stakeholder feedback that a different approach would have put issuers under pressure to rush AML/KYC checks to meet the BoE’s requirements (although the BoE states that, ideally, it would expect systemic issuers and third parties to do those checks at onboarding and on account set-up).
As set out in the 2025 consultation, the BoE won’t restrict redemption models. However, issuers will be required to comply with the requirements set out in the Recognised Payment System Code of Practice, including those relating to operational resilience, third-party risk management, and recovery planning. The BoE intends to update that Code of Practice in 2027 to reflect its application to systemic stablecoin issuers.
Consistent with the role of systemic stablecoins as money, the BoE will not permit systemic stablecoin issuers to suspend redemptions for any reason. Continuous redeemability must be maintained at all times, including under stress. In cases of operational disruption, issuers and/or third parties would be expected to recover operations quickly and safely, in line with their policies, to return to meeting the redemption requirements.
Remuneration and rewards for coinholders
The BoE has clarified the distinction between its prohibition on interest or returns linked to the holding or retention of stablecoins and permitted activity-based rewards, such as those linked to payments or transaction activity.
Permitted rewards are those in the form of benefits, incentives, rebates, discounts and other activity-based rewards that are consistent with the use of a stablecoin as a means of payment. They must not arise from holding or retaining a stablecoin, including by reference to the period for which the stablecoin is held – in which case they would fall within the prohibition.
The BoE highlights that it is likely to regard an arrangement under which a third party makes payments to coinholders calculated solely by reference to the length of time a stablecoin is held with that third party, and those payments are contingent on profits received from the issuer, as falling within the scope of its prohibition. However, payments made by the issuer to service providers or intermediaries as part of a commercial or service level agreement would not be prohibited.
The BoE will continue working with the FCA to monitor the benefits and risks of permitting or prohibiting rewards through indirect remuneration arrangements. It will also continue to monitor developments in other jurisdictions.
Payment system access
As consulted on, the BoE will maintain its expectation that systemic stablecoin issuers should directly access payment systems to support frictionless redemptions.
However, in recognition of the fact that the specific requirements of the different payment systems may mean that obtaining direct access takes time, the BoE will monitor progress and operational feasibility of systemic issuers gaining direct access. Further details on transitional arrangements are set out in the BoE/FCA’s Approach to Joint Regulation document (see our separate article).
The BoE will also work with firms on a case‑by‑case basis to manage any transition from indirect to direct access in a proportionate manner that supports viable business models.
It notes its ongoing work with industry to consult on the design and features of the next-generation retail payments infrastructure in support of greater interoperability between different forms of money, including stablecoins (a key pillar of the National Payments Vision). Looking ahead, it points out that stablecoin issuers will in future need to engage with the BoE and the wider industry to support an orderly transition to this next-generation infrastructure.
Step-up regime for ‘systemic at launch’ issuers
As consulted on, stablecoin issuers recognised by HM Treasury as systemic at launch will be allowed to hold up to 95% of their backing assets in sterling-denominated UK government debt securities as they scale, with the remaining 5% being held in unremunerated central bank deposits.
The percentage will be reduced to 70% (adjusted to reflect the updated proposal on backing assets calibration) once the stablecoin reaches a scale where this is appropriate to mitigate the risks posed by the stablecoin’s systemic importance without impeding the firm’s viability.
When and how an issuer is required to reduce the percentage of sterling-denominated UK government debt securities to 70% will be determined on a case-by-case basis as firms scale.
The BoE emphasises that the step-up approach and the transition for non-systemic firms to being jointly regulated by the BoE and FCA are separate, and guidance will be different for each. Further detail on how the BoE and FCA will be jointly regulating firms and how transition between the two parts of the regime will be managed is set out in the Approach to Joint Regulation document (see our separate article). However, the BoE comments that it would expect the transition period from the FCA’s non-systemic regime to the BoE/FCA systemic regime to take between 12–36 months (possibly shorter or longer depending on a firm’s specific circumstances).
Failure arrangements
Once legislation has been enacted to provide the BoE with the necessary powers to require issuers to hold backing assets and relevant reserves on statutory trust and to maintain robust safeguarding practices (see further above), it expects to consult on the detail of the requirements relating to the failure of a systemic stablecoin issuer. This will include considering whether additional requirements are needed to support operational and contractual continuity of the services of a systemic stablecoin issuer when in the financial market infrastructure special administration regime (FMI SAR).
These arrangements will be intended to ensure that coinholders’ claims are protected from losses experienced by the systemic stablecoin issuer, because – unlike for deposits covered by the Financial Services Compensation Scheme (FSCS) – coinholders’ claims will not be insured.
Note that the BoE states it may revisit these arrangements, working closely with HM Treasury and the FCA, as stablecoin business models develop and the scale of the sector grows.
Systemic importance
The BoE makes the point that, as the differences between the non-systemic and systemic regimes are narrowed and the transition framework is clarified (notably through the Approach to Joint Regulation document – see our separate article), firms are less likely to face ‘abrupt changes in regulatory treatment’ at the point of recognition as systemic.
Which policy areas remain unchanged?
The BoE’s core policy positions on potential systemic use in the UK of non-sterling stablecoins issued outside the UK, location requirements (ie subsidiarisation requirement for non-UK based, sterling-denominated systemic stablecoin issuers), and on the use of public permissionless ledgers by systemic stablecoin issuers remain unchanged from its November 2025 consultation.
Some points of interest include:
Non-sterling stablecoins issued outside UK: While maintaining its previously proposed approach based on engagement with the home authority and potential outcomes-based deference, at the request of respondents to the consultation the BoE has provided further clarity on the elements it would consider when deciding whether to defer to a home authority.
Multi-issuance stablecoins: The BoE notes the emergence of models where multiple legal entities subject to different regulatory requirements issue stablecoins that are meant to be fully fungible across borders – referred to as ‘multi-issuance’. It does not think that these models are suitable for systemic use in the UK. While the BoE’s preference is for single-issuance models backed by a single reserve, subject to robust regulatory requirements, where there are sufficient arrangements in place between it and the home authority to ensure effective co-operation (including in stress scenarios), it will continue to engage with other authorities and industry as regimes and operating models develop.
Public permissionless ledgers (PPLs): The BoE refers to a ‘strong and consistent call’ for it to engage closely with industry to develop practical solutions to the wide and evolving risks presented by PPLs. To this end, the BoE has been engaging in a number of initiatives to explore those risks and the suitability of PPLs for various use cases, including: its Wholesale Experimentation Programme (with a summary report of its learnings due in 2027); its DLT Innovation challenge (with a May 2026 report summarising the findings); engagement with industry on the use of PPLs for securities settlement in the Digital Securities Sandbox (DSS). As a result of the findings from the DLT Innovation challenge, the BoE considers the treatment of probabilistic finality models, and the governance of PPLs, to be areas where further policy development and greater understanding are required.
Areas being finalised as regime is implemented
The BoE highlights two further areas that it is finalising as it implements the regime:
Central Bank Liquidity Facility: The BoE set out in the November 2025 consultation that it was considering providing access to a backstop lending facility for eligible, solvent, and viable systemic stablecoin issuers, which would allow them to borrow against short-term sterling-denominated UK government debt securities in a limited set of circumstances. The BoE now intends to introduce a lending facility for systemic stablecoin issuers, providing short-term, collateralised loans of central bank deposits against sterling-denominated UK government debt collateral. It plans to publish further details on the design and operating parameters of the Central Bank Liquidity Facility in 2027, with access for eligible firms to follow shortly afterwards. The BoE emphasises that the facility is a ‘backstop and not a front-stop’, and that it will be available for fundamentally solvent and viable systemic stablecoin issuers.
Disclosures: While the BoE’s rules focus on the prudential aspects of the regime, trust and confidence in stablecoins and the mitigation of potential financial stability risks arising from widespread use of stablecoins for payments also depend on coinholders and the market having accurate information. It intends to rely primarily on the FCA’s proposed disclosure requirements for stablecoin issuers recognised as systemic under the BoE’s part of the regime. However, the BoE will apply its own supplementary disclosure requirements to systemic issuers where considered necessary. It will consider the evolution of issuers’ business models before setting any additional requirements, and expects to provide further detail on its approach in future publications.
What’s next?
Feedback on the policy statement and draft Code of Practice is requested by 22 September 2026. The BoE intends to finalise the Code of Practice by the end of 2026. The Code of Practice can then be applied to recognised systemic stablecoin issuers.
The BoE also expects to consult on a number of further supporting materials in 2027:
draft guidance on the Code of Practice;
updates to the BoE’s existing Recognised Payment Systems Code of Practice to reflect its application to systemic stablecoin issuers;
any further updates deemed necessary to policy and the draft Codes of Practice to reflect supplementary requirements the BoE may set in future for disclosures, reporting and record-keeping;
proposed policy and a draft Code of Practice on backing asset trust arrangements and distribution rules, and any other provisions necessary, including to support the financial and operational continuity of a systemic stablecoin issuer when in FMI SAR, followed by a policy statement and final Code of Practice;
a statement of policy on the Bank’s supervisory powers in relation to systemic stablecoin issuers; and
the application of the Principles for Financial Market Infrastructures to systemic stablecoin issuers.
The BoE has also recently issued a joint publication with the FCA – the Approach to Joint Regulation document – setting out how the two parts of the UK’s stablecoin regime (non-systemic and systemic) will operate in an integrated, end‑to‑end manner, including the approach to firms transitioning between them and how the BoE’s approach to onboarding new FMIs applies to stablecoin issuers that become jointly regulated and are recognised as systemic at launch. This document is open for consultation until 30 September 2026, and has been published alongside the FCA’s final rules contained in its policy statement PS26/10. Take a look at our articles on the Approach to Joint Regulation document here and on PS26/10 here.
The aim is for regulated stablecoins to operate in the UK from 2027.
With industry, the BoE is also continuing to explore a potential complementary role for stablecoins alongside commercial bank money for settlement in wholesale markets through the DSS. On 30 June 2026, it updated its DSS guidance to state that the Bank and FCA will permit the use of certain stablecoins for securities settlement in the DSS. The authorities will provide further communication and, subject to amending the Central Securities Depository Regulations (CSDR), stablecoins could be used as a settlement asset by FMIs.
If you would like to discuss the potential impact of the BoE’s revised policy positions and draft rules on your business, please get in touch with one of the people listed above or your usual Hogan Lovells Cadwalader contact.
Authored by Virginia Montgomery and Sinéad Meany.