The Bank of England (BoE) has published a revised draft framework for systemic stablecoins, introducing significant changes to reserve management and issuance requirements as the United Kingdom moves toward implementing a comprehensive regulatory regime by 2027. The updated proposals represent an important milestone in the country’s efforts to encourage innovation in digital payments while preserving financial stability.
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 revised framework increases the reserve allocation to 70% in UK government debt and replaces restrictive holding limits with a temporary £40 billion issuance cap for each systemic stablecoin.
Industry Feedback Shapes Regulatory Direction
The updated approach marks a notable 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 extensive 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 BoE 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 (FCA).
The Bank of England plans to finalize the regulatory framework by the end of 2026, creating the foundation for its anticipated implementation in 2027.
The updated rules reflect the Bank of England’s effort to encourage stablecoin innovation while responding to industry concerns about competitiveness and excessive regulatory restrictions.
Calls for a More Risk-Based Framework
Market participants have generally welcomed the revised proposals while encouraging additional refinements. 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.
Meanwhile, 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.
The proposed framework seeks to balance scalable digital payment innovation with financial stability, positioning the United Kingdom for a planned 2027 launch of its systemic stablecoin regulatory regime.
Overall, the evolving policy demonstrates the Bank of England’s intention to integrate systemic stablecoins into a broader multi-money ecosystem that may eventually include commercial bank money and future central bank digital currency initiatives. As stakeholders await the finalized regulations expected by the end of 2026, the UK’s adaptive approach could strengthen its position as a leading jurisdiction for stablecoin oversight while supporting long-term growth and competitiveness in digital finance.
