The Bank of England on June 22, 2026 published its policy statement and draft Code of Practice for systemic sterling stablecoins, replacing controversial per-user holding limits with a £40 billion ($53 billion) issuance cap per designated coin. The framework requires 30% of reserves in unremunera...
"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, 2026 published its policy statement and draft Code of Practice for systemic sterling stablecoins, replacing controversial per-user holding limits with a £40 billion ($53 billion) issuance cap per designated coin. The framework requires 30% of reserves in unremunerated central bank deposits and permits up to 70% in short-dated UK government debt — a 10 percentage point increase from the November 2025 consultation.
The regime targets a 2027 operational launch. Sterling stablecoins currently account for less than $6 million of the $308 billion global stablecoin market. The BOE expects approximately three systemic sterling stablecoins to emerge, with combined issuance representing roughly 2.5% of the £5 trillion in UK bank customer deposits — a threshold calibrated to prevent material disruption to bank credit provision.
Four firms — Revolut, Monee Financial Technologies, ReStabilise, and VVTX — are already testing issuance in the FCA's Regulatory Sandbox, which opened in Q1 2026. The application period for full authorization runs from September 30, 2026 through February 28, 2027.
The BOE's November 2025 consultation paper proposed capping individual stablecoin holdings at £20,000 and business holdings at £10 million. The proposal drew immediate industry pushback, with multiple firms arguing the limits would render sterling stablecoins uncompetitive against dollar-denominated alternatives and undermine the UK's fintech positioning.
The June 2026 policy statement acknowledges this criticism directly. The BOE concluded that a per-coin issuance guardrail of £40 billion achieves "the same policy outcome, while being cheaper and easier to implement, and allowing unrestricted use by households and businesses."
Key structural changes from consultation to final framework:
| Element | Nov 2025 Proposal | June 2026 Final | |---------|-------------------|-----------------| | Individual holding cap | £20,000 | Removed | | Business holding cap | £10 million | Removed | | Issuance guardrail (per coin) | Not proposed | £40 billion | | Interest-bearing asset ceiling | 60% | 70% | | Central bank deposit floor | 40% | 30% | | Redemption window | 24 hours | 24 hours (unchanged) | | Interest to holders | Prohibited | Prohibited |
The £40 billion guardrail is explicitly temporary. The BOE committed to regular reviews and stated it will be "removed once risks to credit provision have been addressed." No specific metrics or timeline for removal were published.
The backing-asset framework mandates that systemic stablecoin issuers hold reserves under two statutory trust arrangements. The structure:
Central bank deposits (minimum 30%): Held in unremunerated accounts at the Bank of England. This component ensures liquidity for prompt redemption — the BOE requires face-value redemption within 24 hours of request. The deposits earn zero interest, creating a direct cost for issuers.
Short-dated UK government debt (maximum 70%): Issuers may invest up to 70% of reserves in short-term gilts. At current UK 3-month gilt yields of approximately 4.3%, this creates a revenue model for issuers. On £40 billion in issuance, the interest-bearing portion (£28 billion in gilts) would generate roughly £1.2 billion in annual revenue — before operational costs.
No yield pass-through: The framework explicitly prohibits paying interest on stablecoin holdings. This mirrors the approach in both the EU's MiCA regulation and the US GENIUS Act. Issuers retain all reserve yield as revenue.
The dual statutory trust structure means reserves are legally segregated from the issuer's balance sheet. In insolvency, coinholders have priority claim on backing assets — a stronger protection than standard bank deposits, which rely on the Financial Services Compensation Scheme (FSCS) for amounts above £85,000.
The BOE's stress-testing methodology examined three risk vectors from deposit-to-stablecoin migration:
The £40 billion per-coin cap — with an expected three dominant coins — implies maximum aggregate stablecoin issuance of approximately £120 billion. Against £5 trillion in UK bank customer deposits, this represents a 2.4% maximum displacement. The BOE's modelling concluded this level does not trigger systemic credit contraction under base-case assumptions.
The Federal Reserve's December 2025 FEDS Note on stablecoin disintermediation found that if stablecoin issuers gain master account access paying the interest on reserve balances (IORB) rate, "maximum degree of bank disintermediation" could result. The BOE's prohibition on central bank interest payments to stablecoin reserves explicitly blocks this channel.
A June 2026 ECB speech by a senior official noted stablecoins "could imply a new wave of bank disintermediation, even if they are unremunerated," drawing parallels to the 1970s growth of money market funds.
The FCA selected four firms from 20 applicants for its stablecoin Regulatory Sandbox, which began testing in Q1 2026:
| Firm | Use Case | Status | |------|----------|--------| | Revolut | GBP-denominated stablecoin for retail payments | Testing | | Monee Financial Technologies | Payment settlement | Testing | | ReStabilise | Wholesale settlement | Testing | | VVTX | Crypto trading infrastructure | Testing |
Revolut's entry is the most commercially significant. The company has over 45 million global users and existing UK payment infrastructure. Its stablecoin proposal targets a GBP peg with 1:1 backing in sterling-denominated reserve assets.
The FCA will open pre-application support services (PASS) in July 2026. Full application windows run September 30, 2026 to February 28, 2027. The regime becomes operational October 25, 2027.
Three major stablecoin frameworks are converging on similar principles but diverge on specifics:
| Requirement | UK (BOE/FCA) | US (GENIUS Act) | EU (MiCA) | |-------------|--------------|-----------------|-----------| | Effective date | 2027 | Jan 2027 or 120 days post-rules | June 2024 (live) | | Reserve composition | 70% gilts / 30% CB deposits | Cash, deposits, T-bills, high-quality liquid assets | 30% minimum in credit institution accounts | | Redemption timeline | 24 hours | "Timely manner" | Same day / next day | | Redemption fees | Permitted (reasonable) | Permitted (commensurate) | Prohibited | | Interest to holders | Prohibited | Prohibited | Prohibited | | Issuance cap | £40B per coin (temporary) | None specified | None specified | | Mutual recognition | None | None | Passporting within EU |
According to Skadden's February 2026 analysis, "major jurisdictions broadly align on key principles of stablecoin regulations but not always on the details." The absence of mutual recognition means issuers must maintain separate licenses and reserve programs in each jurisdiction — a significant compliance cost that favors large, well-capitalized entrants.
The UK's issuance cap is unique among major jurisdictions. Neither MiCA nor the GENIUS Act impose aggregate supply limits on individual stablecoins. This reflects the BOE's specific concern about sterling deposit displacement — a risk less acute for USD stablecoins given the dollar's reserve currency status and deeper capital markets.
The New York Fed's Staff Report 1185 on stablecoin disintermediation provides empirical evidence that stablecoins "erode banks' deposit franchises and transmit liquidity stress to the banking system." The BOE's framework attempts to contain this risk through three mechanisms:
1. Quantity control (£40B cap): Limits the absolute volume of deposits that can migrate to stablecoins.
2. Liquidity recycling (30% CB deposits): Ensures a portion of stablecoin reserves remains within the central bank system, partially offsetting the drain on commercial bank reserves.
3. Gilt allocation (70% ceiling): Investment in government debt does not directly re-enter the banking system as lending capacity, but gilt purchases support government borrowing costs, indirectly benefiting fiscal capacity.
Oliver Wyman's January 2026 analysis noted that large banks with scale and technology may develop "new revenue streams through tokenized deposits, custodial services, and settlement services," while smaller institutions face "more serious headwinds." The UK's banking sector concentration — with five banks holding over 80% of deposits — suggests the large incumbents may adapt, while building societies and smaller lenders face proportionally greater deposit pressure.
Sterling stablecoins currently represent less than 0.002% of UK bank deposits. The journey from $6 million to £40 billion represents four orders of magnitude of growth. Even aggressive adoption scenarios suggest multi-year timelines before the cap becomes binding.
| Date | Milestone | |------|-----------| | June 22, 2026 | Policy statement and draft Code of Practice published | | July 2026 | FCA opens pre-application support services | | September 22, 2026 | Consultation feedback deadline | | September 30, 2026 | Full FCA authorization application window opens | | End 2026 | Code of Practice finalized | | February 28, 2027 | Application window closes | | October 25, 2027 | New cryptoasset regime comes into force |
The BOE's June 2026 framework represents a calculated bet: create regulatory clarity sufficient to attract issuers while maintaining guardrails against deposit displacement. The £40 billion cap — roughly $53 billion per coin — is large enough to accommodate meaningful scale but small enough to contain systemic risk within the BOE's modelled parameters.
The practical question is whether sterling stablecoins can achieve sufficient adoption to matter. Dollar stablecoins command 99% of global market share. GBP usage grew 45% in 2025, but from a negligible base. The BOE's architecture assumes demand will come primarily from UK domestic payments — a use case where existing faster-payment rails already settle in under two minutes.
The framework's real significance may be competitive rather than functional. With the US GENIUS Act targeting January 2027 implementation and MiCA already operational, the UK needed a credible regime to retain fintech capital. The holding-limit reversal signals that maintaining London's position as a financial center takes precedence over theoretical deposit-protection maximalism. Whether that trade-off proves correct depends on adoption rates that remain, at present, speculative.