The Bank of England on June 22 published its policy statement and draft Code of Practice for sterling-denominated systemic stablecoins, reversing core elements of its November 2025 consultation paper. The central bank scrapped proposed individual holding caps of £10,000–£20,000 and corporate limi...
"This is a major milestone in delivering greater choice and innovation in UK payments. Innovation thrives on trust. 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." — Sarah Breeden, Deputy Governor for Financial Stability, Bank of England
The Bank of England on June 22 published its policy statement and draft Code of Practice for sterling-denominated systemic stablecoins, reversing core elements of its November 2025 consultation paper. The central bank scrapped proposed individual holding caps of £10,000–£20,000 and corporate limits of £10 million, replacing them with a single macro-level issuance guardrail of £40 billion (~$53 billion) per systemic stablecoin. Reserve composition rules were loosened: issuers may now hold up to 70% of backing assets in short-term UK government debt (gilts with under six months' remaining maturity), up from 60% in the original proposal, with the remaining 30% required as unremunerated deposits at the Bank of England.
The reversal, driven by industry pushback and a House of Lords Financial Services Regulation Committee intervention, marks the UK's clearest attempt to position itself as a stablecoin-friendly jurisdiction while the EU enforces MiCA's stricter regime and the US implements the GENIUS Act. Feedback closes September 22, 2026. Final rules are expected by year-end, with regulated stablecoin operations commencing in 2027.
The June 22 policy statement rewrites three pillars of the November 2025 consultation:
Holding limits eliminated. The original proposal capped individual stablecoin holdings at £10,000–£20,000 (approximately $13,600–$27,200) and business holdings at £10 million ($13.6 million). The BoE stated these would be "costly and hard to implement" and replaced them with an aggregate issuance cap. The Bank noted this "delivers the same policy outcome, while being cheaper and easier to implement, and allowing unrestricted use by households and businesses."
Reserve composition relaxed. The earlier consultation recommended a 60/40 split between short-term gilts and central bank deposits. The final framework shifts to 70/30, allowing issuers to earn yield on a larger share of reserves while maintaining a liquidity backstop through the mandatory 30% central bank deposit.
Interest payment prohibition retained. Despite loosening other restrictions, the BoE maintains its ban on direct interest payments to stablecoin holders. However, the framework explicitly permits activity-based rewards such as cashback tokens or loyalty points tied to transactions — a narrow but commercially significant carve-out.
The scope of the regime applies only to systemic stablecoins designated by HM Treasury under the Banking Act 2009. Non-systemic stablecoins used for cryptoasset trading remain under FCA supervision only. The Bank and FCA are coordinating a managed transition framework for firms that grow from non-systemic to systemic status.
The reserve structure determines issuers' profit margins and, by extension, the economic viability of sterling stablecoin operations. Under the final rules:
| Component | Allocation | Eligible Assets | Yield Potential | |-----------|-----------|-----------------|-----------------| | Tranche A | Up to 70% | Short-term UK gilts (< 6 months maturity) | Current 6-month gilt yield: ~4.3% | | Tranche B | Minimum 30% | Unremunerated BoE deposits | 0% |
For a hypothetical issuer at the £40 billion cap, Tranche A of £28 billion invested in short-term gilts at current yields would generate approximately £1.2 billion in annual gross revenue. The £12 billion in unremunerated central bank deposits represents a direct opportunity cost — capital that earns nothing while still requiring the issuer to maintain operational infrastructure.
This structure creates a fundamentally different profit model than US-regulated stablecoins. Under the GENIUS Act, US issuers may invest reserves in US Treasury bills with maturities of 93 days or less, cash, and reverse repos — but face no mandatory zero-yield tranche. Circle's USDC reserves, for instance, are almost entirely invested in short-duration Treasuries and money market instruments.
The 30% dead-weight deposit requirement functions as an implicit tax on UK stablecoin issuance, reducing the net yield a sterling stablecoin can generate compared to its dollar-denominated competitors.
The £40 billion ($53 billion) per-stablecoin cap is designated as temporary and subject to periodic review. To contextualize this figure:
The gap between the £40 billion ceiling and the current ~$5 million sterling stablecoin market is vast. The cap is not an immediate constraint but a signal: the BoE is prepared for rapid adoption while reserving the ability to tighten if stablecoin growth threatens credit provision or money market stability.
The Bank stated it will "review the calibration of the guardrail regularly" and expects it to be "phased out as the market matures." This language suggests the £40 billion cap is a concession to financial stability concerns rather than a permanent architectural feature.
By comparison, MiCA imposes no explicit issuance cap on euro-denominated stablecoins. Instead, it uses transaction volume triggers: stablecoins exceeding 1 million daily transactions or €200 million daily volume are classified as "significant" and face heightened requirements, including 60% reserve deposits at credit institutions (versus the BoE's 30%).
Six major jurisdictions now have stablecoin frameworks either enacted or in final rulemaking. The approaches differ materially:
| Jurisdiction | Framework | Reserve Requirement | Holding/Issuance Limits | Interest to Holders | Timeline | |-------------|-----------|--------------------|-----------------------|--------------------|---------| | UK | BoE Code of Practice | 30% BoE deposits, 70% gilts | £40B per stablecoin (temporary) | Prohibited | 2027 | | US | GENIUS Act | 100% in Treasuries ≤93 days, cash, repos | None specified | Prohibited | Implementing 2026 | | EU | MiCA | 30–60% bank deposits (based on significance) | Volume-based triggers | Prohibited | Enforcing July 2026 | | Japan | Payment Services Act | Bank/trust company deposits | None specified | N/A (bank-issued only) | Active | | Singapore | MAS Framework | Low-risk liquid assets, MAS-specified | None specified | Subject to MAS rules | Active | | Hong Kong | Stablecoin Ordinance | Full 1:1 backing, segregated | None specified | Subject to HKMA rules | Licensing in progress |
Three patterns emerge. First, every major jurisdiction now mandates 1:1 reserve backing and prohibits rehypothecation. Second, the US (GENIUS Act) offers the most permissive reserve composition, allowing issuers maximum yield extraction. Third, the UK and EU occupy a middle ground, with the EU imposing stricter deposit requirements for significant stablecoins.
The UK's approach is distinct in one respect: it is the only framework to impose a hard issuance ceiling rather than relying on activity-based thresholds or prudential capital scaling.
The global stablecoin market reached $321 billion in aggregate market capitalization as of Q2 2026, according to DefiLlama data. Approximately 99% of stablecoins in circulation are US dollar-denominated, according to American Banker.
Market share breakdown:
Ethereum hosts approximately $170 billion (53%) of total stablecoin supply, followed by Tron with approximately $87 billion (27%).
The UK's sterling stablecoin market — roughly $5 million — represents 0.0016% of the global total. This is not a competitive position; it is functionally a rounding error. The BoE framework is designed to change this by creating regulatory certainty that attracts issuers to launch GBP-denominated products.
The growth trajectory matters. The total stablecoin market expanded from under $50 billion five years ago to $321 billion today — a 540% increase. If sterling stablecoins captured even 1% of the global market, that would represent approximately $3.2 billion — well within the £40 billion guardrail but orders of magnitude above current levels.
The BoE framework creates asymmetric incentives for existing and prospective issuers.
Circle is already registered with the FCA as an Electronic Money Institution and has operational UK infrastructure. The company is positioned to pursue BoE authorization for a sterling-denominated product or to seek systemic designation for USDC's UK operations. Circle's compliance-forward posture aligns with the BoE's regulatory expectations. The 70/30 reserve structure, while less favorable than US rules, is manageable within Circle's existing treasury operations.
Tether faces structural barriers. The company has historically operated from offshore jurisdictions and lacks UK regulatory standing. According to CCN, "the most natural route for Tether would be to remain offshore, but this approach will limit USDT to existing use cases or require intermediation by UK-regulated entities for payments integration." The 30% unremunerated deposit requirement and prohibition on interest payments reduce Tether's margin advantage relative to less-regulated alternatives.
Sterling-native issuers — such as tGBP, whose CEO Benoit Marzouk stated the UK has "an opportunity to set clear, upfront rules that allow innovation while embedding safeguards early" — stand to benefit most. These firms can build compliant operations from inception rather than retrofitting existing structures.
The broader question is whether a UK-specific stablecoin can achieve sufficient network effects to compete with dollar-denominated incumbents. Sterling's 3.5% share of global forex reserves (compared to the dollar's 58%) suggests a natural ceiling, but domestic payment use cases — payroll, retail transactions, B2B settlement — do not require global reserve currency status.
The BoE framework redistributes economic value across the stablecoin stack in specific ways:
Issuers capture yield on 70% of reserves but surrender 30% as a zero-yield deposit — an implicit subsidy from private issuers to the central bank's balance sheet. At scale (£40 billion), this represents approximately £12 billion in deposits that the BoE receives at zero cost.
The UK Treasury benefits indirectly: up to £28 billion in new demand for short-term gilts could compress gilt yields at the short end, reducing the government's borrowing costs marginally.
Holders receive no direct yield. The prohibition on interest payments means the economic value generated by reserve assets accrues entirely to issuers. This creates a transfer from holders (who bear opportunity cost) to issuers (who earn the spread). The activity-based reward carve-out offers a partial but indirect channel for value return.
Validators and infrastructure operators — the entities that process on-chain stablecoin transactions — are unaffected by the BoE framework, which focuses exclusively on issuance and reserve management rather than on-chain settlement mechanics.
This value distribution follows a pattern common across regulated stablecoin frameworks globally: regulators constrain yield-sharing to prevent stablecoins from functioning as shadow bank deposits, while issuers retain the spread as compensation for compliance costs and operational overhead.
The Bank of England's June 22 policy statement represents a pragmatic recalibration. Faced with industry criticism that the original proposal was "overly conservative" and would drive stablecoin activity offshore, the central bank retained its financial stability mandate while substantially loosening the operational constraints. The £40 billion guardrail is large enough to accommodate significant growth — sterling stablecoins would need to expand by a factor of 8,000 from current levels to reach it — while preserving the BoE's ability to intervene if adoption outpaces risk management.
The framework's success depends on whether issuers find the economics workable relative to the US (more permissive reserves, no issuance cap) and EU (stricter deposit rules but no hard ceiling). The 70/30 reserve split places the UK between these two poles. Whether that position attracts issuers or merely occupies regulatory no-man's-land will become clearer once the FCA opens its authorization window on September 30, 2026.
The consultation period closes September 22. Final rules are expected by December. The first regulated sterling stablecoins could begin operating in early 2027.