The Bank of England has eased reserve composition requirements for issuers of pound-denominated stablecoins and abandoned plans to impose holding limits on the tokens. Instead, it introduced a temporary issuance cap of £40 billion per stablecoin.
The Bank of England (BoE) unveiled the final framework for regulating systemically important sterling-backed stablecoins. The new rules were published as part of a consultation on a proposed Code of Practice for issuers of systemic stablecoins. The framework forms the foundation of the U.K.’s regulatory regime for digital payment assets and is expected to receive final approval by the end of 2026. The requirements will then apply to issuers designated as systemically important.
Key features of the new regime include:
- a maximum issuance volume of £40 billion for each systemic stablecoin;
- reserve requirements consisting of 70% short-term U.K. government bonds and 30% deposits held at the Bank of England;
- permission to use repo and reverse repo transactions involving government bonds with maturities of up to six months;
- a requirement to maintain a 1:1 asset backing ratio;
- redemption requests processed within no more than 24 hours after receipt of a complete request;
- a prohibition on suspending stablecoin redemptions, even during periods of market stress;
- a ban on paying interest to stablecoin holders.
One of the most significant changes involved reserve requirements. Under the draft rules published in 2025, the Bank of England proposed that 40% of reserves be held as non-interest-bearing deposits at the central bank, with the remaining 60% invested in short-term U.K. government bonds. The final framework changed that allocation to 30/70. Issuers will be allowed to invest up to 70% of reserves in U.K. government securities with maturities of up to six months, while the remaining 30% must be held on deposit at the Bank of England. These deposits will not earn interest.
The regulator also abandoned previously proposed limits on the amount of stablecoins that users could hold. In 2025, the Bank of England considered imposing caps of £20,000 for individuals and £10 million for businesses. Following industry criticism, the central bank decided to replace those restrictions with a temporary cap on total issuance. During the initial phase, each systemic stablecoin will be limited to a maximum issuance volume of £40 billion. The threshold will be reviewed regularly and may eventually be removed.
To strengthen market resilience, the Bank of England also plans to establish a dedicated lending facility for issuers of systemic stablecoins. The mechanism will provide access to short-term liquidity secured by government bonds in exceptional circumstances when market-based funding sources become unavailable. The regulator plans to provide further details on the facility in 2027.
Under the new requirements, stablecoin holders must be able to redeem their tokens for pounds sterling at par value at any time. Issuers will be required to process redemption requests either in real time or no later than 24 hours after receiving all required information and completing the necessary checks.
The Bank of England said the new regulatory framework is designed to balance innovation in digital payment instruments with the need to safeguard financial stability. The regulator expects the updated rules to support the use of sterling stablecoins in both retail and corporate payments while maintaining a high level of confidence among users and financial market participants.
The Financial Conduct Authority (FCA) previously identified the development and finalization of rules governing pound-denominated stablecoins as a key priority for 2026.
