The Bank of England has approved a new regime for systemic stablecoins: key changes and analysis
The Bank of England has officially presented updated rules for systemically important stablecoins denominated in pounds sterling. The regulator has revised requirements for reserves and limits, aiming to balance innovation and financial stability.
Relaxation of Reserve Structure
One of the key changes is the reduction in the share of funds that issuers are required to hold in non-interest-bearing deposits at the Central Bank — from 40% to 30%. The remaining 70% of reserves can now be placed in short-term UK government bonds with maturities of up to six months. This is a step towards the market, which had previously criticized the excessive rigidity of the initial requirements.
Rejection of Commercial Deposits and New Issuance Limit
The regulator has categorically ruled out the possibility of using deposits in commercial banks as collateral, citing risks to financial stability in crisis scenarios. Instead of individual limits for users, a general issuance cap for a single stablecoin is introduced — £40 billion. This figure is considered a temporary "safeguard" that will be revised as the system adapts.
Redemption Obligations and Emergency Liquidity Mechanism
Issuers are required to ensure the right to redeem stablecoins for fiat at par within 24 hours. To support the sector, the Bank of England will launch an emergency liquidity mechanism in 2027, allowing loans secured by government bonds. The set of rules is expected to be finalized by the end of 2026 and will affect companies deemed systemically important for the economy.
Political Context and Prospects
The publication of the rules coincides with a political crisis: Prime Minister Keir Starmer resigned after a defeat in local elections amid rising inflation and the blockade of the Strait of Hormuz. Andy Burnham may become the new head of government. Recall that earlier the Bank of England stated its focus on RWA for modernizing the economy.
My analysis: Reducing the share of non-interest-bearing deposits to 30% is a reasonable compromise that lowers costs for issuers while maintaining an adequate level of protection. The £40 billion limit looks conservative, but its temporary nature gives the market room for growth. However, the rejection of commercial deposits could slow the integration of stablecoins with the traditional banking system. Overall, the Bank of England demonstrates a pragmatic approach, which is positive for the long-term development of the sector.