The Bank of England has approved a new regime for sterling stablecoins: easing reserves and a £40 billion limit.
The Bank of England has officially introduced updated rules for systemically important stablecoins denominated in pounds sterling. The regulator has revised key collateral requirements and established temporary issuance limits, signaling a gradual integration of digital assets into the UK's traditional financial system.
The main change concerns the reserve structure. Instead of the initially proposed 40% of funds held in non-interest-bearing deposits at the Central Bank, the final version reduces this share to 30%. The remaining 70% can be placed by issuers in short-term UK government bonds with maturities of up to six months. This decision significantly increases returns for issuers while maintaining a high level of liquidity and reliability.
An important nuance: the regulator has categorically refused to allow the use of deposits in commercial banks as collateral. According to the Bank of England's assessments, this approach creates unacceptable risks for financial stability in the event of a systemic crisis, when access to bank funds may be restricted.
Instead of individual limits on stablecoin holdings for citizens and businesses, a general issuance limit per asset of £40 billion has been introduced. This figure is considered a temporary "safeguard" that will be reviewed as the market adapts. The regulator's logic is clear: this approach allows for controlling systemic risks without creating excessive pressure on retail users.
Issuers are required to ensure the right to redeem stablecoins for fiat at par within 24 hours of a request. To support the sector, an emergency liquidity facility will be launched in 2027, allowing loans from the Central Bank backed by government bonds. This creates an additional safety buffer for major players.
The final set of rules is expected to be approved by the end of 2026. The document has been developed jointly with the Financial Conduct Authority (FCA), and a scheme for joint market regulation is expected to be published shortly.
Political context and my conclusions
The publication of the rules coincided with a political crisis: Prime Minister Keir Starmer resigned after Labour's defeat in local elections amid rising inflation and economic problems. However, this should not be misleading — the Bank of England's regulatory work remains depoliticized and consistent.
My expert assessment: The Bank of England is demonstrating a balanced and pragmatic approach, which compares favorably with the overly strict or, conversely, permissive regimes of other jurisdictions. Reducing the mandatory reserve requirement at the Central Bank to 30% and introducing a temporary issuance limit is a signal to the market: the regulator is open to dialogue but does not intend to sacrifice stability. If the emergency liquidity mechanism works effectively, London could become one of the key hubs for institutional stablecoins in Europe. However, it is worth closely monitoring how the political situation develops — a change in government could affect the speed of rule implementation.