Sterling-denominated systemic stablecoins: the Bank of England's policy statement and Draft Code of Practice

What is this?

A policy statement responding to the Bank's November 2025 consultation, packaged with a consultation on the draft Code of Practice for sterling-denominated systemic stablecoin issuers.

What is the driver?

Delivery of the systemic limb of the UK's two-part regime, alongside the Financial Conduct Authority’s (‘FCA’) regime for non-systemic issuers, and a response to industry and to the House of Lords Financial Services Regulation Committee, which pressed the Bank of England (the ‘Bank’) to ease its November 2025 proposals.

Who is affected?

Issuers of sterling-denominated systemic stablecoins and recognised service providers; firms scaling from FCA solo-regulation into the systemic regime; and banks acting as custodians or account providers. Non-UK sterling denominated systemic issuers must subsidiarise in the UK.

What are the headline changes?

• Per-coinholder holding limits ditched and replaced by an initial maximum issuance of £40 billion
• Backing assets calibration of 30% (down from 40%) in unremunerated central bank deposits and 70% (up from 60%) in short-term UK government debt securities with up to 6 months’ maturity
• Issuers may undertake overnight reverse repos 
• A 24-hour redemption clock for redemption requests (post-KYC)
• A confirmed Central Bank Liquidity Facility
• Two-trust statutory safeguarding model

Key dates

• Imminent: the Bank and FCA Approach to joint regulation, covering end-to-end operation and the FCA to Bank transition and guidance on using stablecoins in the Digital Securities Sandbox
• 22 September 2026: the consultation on the draft Code of Practice closes 
• End 2026: the Bank intends to finalise the Code of Practice for recognised systemic issuers
  2027: the Bank will consult on and publish a number of supporting materials, including updates and guidance on the Code of Practice, supervisory policy, and the design of the new central bank liquidity facility

The UK has proposed a two-part stablecoin regime. The FCA regulates the issuance, custody and admission to trading of UK-issued qualifying stablecoins, and, in future, their use in payments; the Bank regulates those HM Treasury recognises as systemic under Part 5 of the Banking Act 2009, with the FCA retaining conduct and consumer protection for systemic stablecoins. This publication converts the Bank's policy positions for systemic stablecoins into draft rules and, in doing so, materially relaxes some of its original proposals published in November 2025.

The backdrop is a global stablecoin market of around $315 billion US dollars in early 2026, of which sterling tokens account for roughly only 0.5%. The Bank's softening therefore reads as much as a competitiveness move, aimed at making the UK a viable place to issue at scale. The result keeps the Bank's financial stability red lines on backing asset quality, redemption and safeguarding, while easing the two features industry pushed back on hardest: holding limits and the unremunerated deposit floor.

• Holding limits ditched, issuance guardrail introduced. The proposed £20,000 individual and £10 million business per-coinholder holding limits have been dropped in favour of a temporary guardrail on aggregate issuance, set initially at £40 billion per systemic stablecoin product, with no limits on the size, frequency or type of transaction. The Bank states that it will ‘regularly review’ the guardrail. The cap is on how much of a coin can exist, not on how much any one user can hold, and it is expressly not a marker of the systemic recognition threshold.
• Revised backing assets calibration. The minimum share of backing assets that must sit in unremunerated central bank deposits has been set at 30% (previously 40%), freeing up to 70% (previously 60%) to be held in short-term UK government debt of up to six months' maturity. The Bank has stated that the 30% floor is recalibrated against adjusted liquidity coverage ratio outflow rates, rather than the estimates based on the outflows experienced in March 2023 by Silicon Valley Bank and the subsequent de-pegging of the USDC stablecoin. 
• Reverse repo now permitted. Issuers may lend sterling-denominated UK government debt to raise liquidity, and may now also enter overnight reverse repo to deploy surplus liquidity (i.e. above the 30% central bank deposit requirement), subject to over-collateralisation, collateral haircuts, and a prohibition on collateral chains to protect the backing asset pool. 1:1 backing of issued stablecoins must be maintained at all times. 
• Redemption request process clarified. Issuers must process redemptions, which should be free of charge where possible or with fair, transparent and proportionate redemption fees, as soon as practicable, and no later than within 24 hours of receipt of the request. The clock starts for a full redemption request only once the redemption request is received, AML and KYC checks are complete, and the coins are in the wallet from the coinholder making the request. Issuers may not suspend redemptions, although the Bank retains a power to direct a suspension.
• Central Bank Liquidity Facility confirmed. The Bank has stated its intention provide a backstop liquidity facility enabling issuers to monetise sterling UK government debt in exceptional circumstances where private market channels are disrupted or ineffective, in order to support confidence and financial stability. Further details on the design and operation will follow in 2027.
• Two statutory trusts for safeguarding. The proposed trust structures, subject to HM Treasury legislation, ring-fence assets by purpose, separating those backing the stablecoin (including reserves) from those held to fund an orderly wind-down. One trust will protect coinholders’ claims on 1:1 backing assets, while a separate trust will fund insolvency costs, operational wind-down, and any shortfall on redemption.
• Intra-group custodians permitted. This approach acknowledges the currently limited availability of unconnected custodians for systemic stablecoin issuers, and the concern of unintended concentration risks of a small custodian pool. Daily reconciliation and signed acknowledgement letters will be required. 
• Remuneration position clarified. The Bank upholds its position that issuers should not pay interest to coinholders, and widens the prohibition to any holding-based return from any funding source, but activity-based payment rewards, such as rebates and loyalty linked to payment use, are expressly permitted where they do not arise from holding or retaining the stablecoin. 
• Non-sterling stablecoins issued outside the UK. The Bank continues to consider deference to the home authority to be the most suitable, focussing on the requirements for a legal claim against the issuer, redemption mechanisms, and backing asset requirements. The Bank also indicates that so-called ‘multi-issuance’ models, where multiple legal entities issue fungible stablecoins, are not suitable for systemic use.

The Bank’s statement presents stablecoins as one form of money among several in an emerging multi-money landscape, operating alongside traditional bank deposits, tokenised bank deposits and, potentially, a retail central bank digital currency. They are expected to support a range of retail applications, from person-to-person transfers and merchant and online payments to cross-border flows, with the benefits framed as faster, cheaper and more programmable settlement. With respect to the wider landscape:

• The stablecoin regime is positioned as a component of the National Payments Vision and the next-generation retail payments infrastructure, taken forward through the Bank's chairing of the Retail Infrastructure Payments Board. 
• The Bank and FCA intend to publish shortly an Approach to Joint Regulation, setting out how the two parts of the regime operate end-to-end, how recognition works, and how a firm transitions from FCA solo-regulation into joint Bank and FCA regulation as it becomes systemic. 
• HM Treasury is also shortly to consult on changes to the UK payment services and e-money regime. This will include regulating UK-issued stablecoins used as payments within the new payment services regime. The Bank is silent on the interaction between its regime and the new payment services regime, and the interaction between the UK’s new cryptoassets and payments regimes will be a key area of future focus. 

• Is the backing still too restrictive? Even at 70/30, eligible backing is confined to central bank deposits and short-term UK government debt, with commercial bank deposits, money market funds and a broader asset set still excluded. Measured against MiCAR and the US GENIUS Act, the market may still read the UK as conservative. 
• How 'temporary' is the guardrail? The £40 billion issuance cap is described as temporary, but carries no sunset date. It is to be reviewed and removed only once the Bank is satisfied that risk to credit provision is mitigated and that it can see how banks are adjusting their funding models. 'Temporary' here is conditional and open-ended rather than time-limited, and firms cannot yet plan against a removal date.
• No increased detail on ledgers: The position on public permissionless ledgers is unchanged from the Bank’s previous November 2025 consultation paper: it remains open to issuers using public permissionless ledgers provided they can meet its expectations and preserve trust and confidence in money, but it continues to view accountability, settlement finality and operational resilience (including cyber security) as the areas these ledgers may struggle to satisfy. Probabilistic finality models and ledger governance are flagged as needing further policy development, notes that faster settlement on these ledgers often comes at the cost of reduced decentralisation, and flags that governance arrangements still frequently rely on off-chain processes. 
• The wider wholesale markets agenda. On wholesale markets, the Bank reaffirms that central bank money has, and will retain, the critical role in final settlement, and allows a complementary role for stablecoins as a settlement asset, to be explored through the Digital Securities Sandbox (DSS). The Bank will publish its proposals for using stablecoins in the DSS ‘shortly’. 

• Consider whether to respond to the consultation. The paper is open until 22 September 2026. Issuers, prospective issuers and others with a view on the rules, on business model viability or on operational constraints may wish to engage, directly or through trade associations.
• Watch for further regime colour. Much of the regime is now in draft rule form, but the statutory trust legislation, the joint Bank and FCA approach, the Central Bank Liquidity Facility and the application of the PFMIs, are yet to be published.
• Keep the timing in perspective. No stablecoin has yet been designated as systemic by HM Treasury, and the Code will not apply until it is finalised, intended by end 2026, and a firm is recognised.
• Watch the transition path for firms scaling under the FCA regime. The forthcoming Approach to Joint Regulation should explain how a firm moves from FCA solo-regulation into joint Bank and FCA regulation as it approaches systemic scale. Firms on a growth trajectory may wish to factor the anticipated 12 to 36 month transition into longer-term planning.
• Begin scoping the practical implications, without over-committing. Where relevant, firms could start to think through what the 70/30 backing model, the two-trust safeguarding structure, direct payment system access, and the 24-hour redemption requirement might mean for their operating model, custody and liquidity arrangements.