Bank of England Eases Stablecoin Rules, Targets 2027 Rollout
The Bank of England (BoE) has released draft rules for systemic stablecoins, proposing key adjustments to issuance and reserve requirements as the UK eyes a 2027 regulatory framework rollout. This marks a pivotal step in the country’s broader strategy to enable innovation in digital payments while safeguarding financial stability.
The new proposals allow systemic stablecoin issuers to hold up to 70% of their reserves in interest-bearing UK government debt, up from 60% in prior drafts. Additionally, the BoE has replaced proposed per-entity holding limits with a temporary issuance cap of £40 billion ($52.8 billion) per stablecoin. The cap will be reviewed periodically and removed once credit market risks are deemed manageable, according to the central bank.
This regulatory update is a departure from the BoE’s November 2025 draft, which suggested strict holding limits: £20,000 per individual and £10 million per business. Industry feedback flagged these limits as overly restrictive, potentially stifling adoption and rendering UK-based stablecoins less competitive globally. Responding to these concerns, the central bank adopted a more flexible approach.
Balancing Innovation and Stability
The BoE defines systemic stablecoins as those widely used for payments that could pose risks to UK financial stability. These tokens will operate under stricter oversight compared to non-systemic stablecoins, which remain under the Financial Conduct Authority’s (FCA) jurisdiction. The BoE aims to finalize the regulatory framework by late 2026, positioning the UK as a leader in stablecoin regulation ahead of the planned 2027 launch.
ClearBank CEO Mark Fairless welcomed the shift in reserve and issuance policies but emphasized the need for a more risk-based framework. “The Bank of England has clearly listened on holding limits, moving towards a more proportionate framework. But further progress is needed to avoid constraining sustainable business models, particularly regarding backing asset requirements,” Fairless noted.
Industry’s Role in Shaping Regulation
The regulatory adjustments come after extensive consultation with digital asset firms. In May, Deputy Governor Sarah Breeden signaled the central bank’s willingness to ease restrictions, acknowledging industry concerns that UK stablecoins could lose ground to U.S. dollar-backed rivals if overly conservative rules were enforced. The BoE’s focus remains on avoiding large-scale deposit migrations from traditional banks into stablecoins, a scenario that could disrupt credit availability and destabilize sterling money markets.
Notably, the UK is the only country to cap stablecoin issuance in its own currency, a point raised by Katie Harries, Coinbase’s head of policy for Europe. She questioned the temporary nature of the cap and highlighted the importance of enabling stablecoins to settle core wholesale market transactions to fully realize the UK’s tokenization ambitions.
What’s Next?
The BoE’s evolving stance underscores a delicate balancing act: fostering innovation in tokenized payments while maintaining financial stability. The upcoming regulatory framework will complement the UK’s broader efforts to integrate systemic stablecoins into a multi-money system alongside commercial bank money and potential central bank digital currency (CBDC) initiatives.
Stakeholders eagerly await the finalized rulebook, which the BoE aims to publish by year-end 2026. For now, the UK’s willingness to adapt its approach based on industry input could position it as a global leader in stablecoin regulation—but only if the framework supports scalable and competitive business models.