Bank of England Eases Stablecoin Rules With £40B
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- Bank of England published its final policy statement and draft rulebook Monday for "systemic" stablecoins, dropping planned caps on how much any one person could hold in favor of a per-coin issuance limit initially set at £40 billion ($52.8 billion).
- Issuers can now hold up to 70% of backing assets in short-term UK government debt — up from the proposed 60% — with the remaining 30% in non-interest-bearing deposits at the Bank, partly addressing industry complaints that too much capital was earning nothing.
- Sarah Breeden, the Bank's deputy governor for financial stability, called the framework "a major milestone in delivering greater choice and innovation in UK payments" and described it as a "world leading regime."
- The £40 billion ceiling is framed as a temporary "guardrail" to protect credit flows — not a user-facing restriction — and will be reviewed and removed once risks to bank lending are addressed, the Bank said.
- The Bank of England conceded in May it may have been "overly conservative," citing industry warnings that its original proposals would dent UK competitiveness against U.S. and European stablecoin regimes.
- The regime covers only stablecoins used widely enough in payments to pose financial-stability risks; tokens used mainly for crypto trading will stay under Financial Conduct Authority oversight.
- The Bank is taking feedback until September 22 and aims to finalize rules by end-2026, with regulated sterling-backed stablecoins expected to operate in the UK from 2027.
Why it matters: The Bank eased three core industry pain points — holding caps, reserve composition, and yield potential — to keep sterling competitive in a market the dollar already dominates, but the temporary £40 billion issuance ceiling and the fact that it can be removed only "once risks to credit are addressed" show the Bank is still prioritizing bank-lending stability over fast stablecoin growth before regulated UK coins launch in 2027.
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