Bank of England Announces New Stablecoin Regulations

By W.B. King

In what marks a key milestone in establishing the UK’s stablecoin regime, in late June, Bank of England published its policy statement and draft Code of Practice (i.e., rules) for systemic stablecoin issuers.

“The framework supports safe innovation, enabling UK-issued stablecoins to develop as trusted forms of digital money,” The Bank of England, the central bank of the United Kingdom, noted in a June 22 statement. “Alongside other innovations in money and payments, stablecoins could enable faster, cheaper and more flexible services for users, including cross‑border use cases, while supporting new programmable functionality.”

The new rule, updated from last year’s policy statement, provides coin issuers with “clarity to innovate and scale within a framework that maintains resilience, confidence and trust in money,” Bank of England stated. “The Bank and the Financial Conduct Authority (FCA) are working closely to deliver an end-to-end regime, including a managed transition as firms grow from non-systemic to systemic. Further detail will be published alongside the FCA’s final rules shortly.”

A New Day for Payments

Andrew Jones, Co-Founder and Managing Director ChilliMint (Europe) Limited, said Stablecoins are no longer “a crypto story” but rather a “payments story." Based in Warwick, Warwickshire, the company offers marketing and strategy consultancy services in retail financial services.

He continued. “A few years ago, most of the conversation was about the technology. Faster settlement. Programmability. Blockchain. New rails. But the further stablecoins move into the mainstream, the less people seem to care about the technology and the more they care about the questions payments people have been asking for decades.”

Among Bank of England policy changes are the following:

• Backing assets: The maximum share held in interest‑bearing assets (short-term UK government debt) has been increased from 60% to 70%, with the remainder in central bank deposits. These deposits enable issuers to meet redemptions promptly. The change supports more viable business models while still allowing issuers to deal with outflows.

• Temporary issuance guardrails: The Bank will safeguard the economy’s access to credit without introducing the temporary holding limits it consulted on last year. Instead, a temporary issuance guardrail will apply to each systemic stablecoin, initially set at £40 billion. This delivers the same policy outcome, while being cheaper and easier to implement, and allowing unrestricted use by household and businesses. This guardrail will be reviewed regularly and removed once risks to credit provision have been addressed.

  
  

“This is a major milestone in delivering greater choice and innovation in UK payments. Innovation thrives on trust,” said Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England. “And today we’ve set out the foundations of that trust for a new form of money - with prompt redemption, strong protections and central bank support. This is truly a world leading regime.”

If all goes as planned, the Bank of England intends to finalize the Code of Practice by the end of 2026.  “For me, the most interesting part is that governance is starting to look harder than technology,” said Jones. “Building a stablecoin is one challenge. Deciding who carries risk, who provides oversight and how trust is maintained at scale is a much bigger one.”