The Bank of England on June 22, 2026 published its final policy statement and draft Code of Practice for sterling-denominated systemic stablecoins, establishing the regulatory architecture under which pound-pegged tokens will operate from 2027. The framework reverses earlier proposals to cap indi...
"This is a major milestone in delivering greater choice and innovation in UK payments. Innovation thrives on trust." — Sarah Breeden, Deputy Governor for Financial Stability, Bank of England
The Bank of England on June 22, 2026 published its final policy statement and draft Code of Practice for sterling-denominated systemic stablecoins, establishing the regulatory architecture under which pound-pegged tokens will operate from 2027. The framework reverses earlier proposals to cap individual holdings at £20,000, replacing them with a £40 billion per-issuer ceiling on total circulation — a figure equivalent to roughly $53 billion at current exchange rates.
The final rules mandate 100% reserve backing at all times, split between a maximum of 70% in short-term UK government debt and a minimum of 30% in unremunerated Bank of England deposits. This represents a relaxation from the 60/40 split proposed in the November 2025 consultation paper, a concession to industry feedback that the original ratio would render sterling stablecoins commercially unviable against dollar-denominated competitors.
The policy positions the United Kingdom as the third major jurisdiction — after the European Union under MiCA and the United States under the GENIUS Act — to finalize a comprehensive stablecoin regulatory regime. However, material differences between the three frameworks create compliance fragmentation that may cost mid-size issuers between $200,000 and $500,000 in additional annual operational costs, according to independent legal analyses published in early 2026.
The Bank of England's November 2025 consultation paper proposed three primary constraints on systemic stablecoin issuers: per-person holding limits of £20,000, per-business limits of £10 million, and a reserve requirement mandating 40% of backing assets be held as unremunerated central bank deposits.
The June 22 final policy statement revises all three:
| Parameter | Nov 2025 Proposal | June 2026 Final | |---|---|---| | Individual holding limit | £20,000 | Removed | | Business holding limit | £10 million | Removed | | Central bank deposit floor | 40% | 30% | | Government debt ceiling | 60% | 70% | | Per-issuer circulation cap | Not proposed | £40 billion | | Redemption window | Not specified | 24 hours at face value |
The shift from per-wallet caps to an aggregate issuance ceiling reflects what the BoE described as a more proportionate approach to managing the risk of rapid deposit disintermediation — the scenario in which consumers move funds from bank accounts into stablecoins faster than the banking system can adjust its funding models.
Under the finalized rules, each systemic stablecoin must maintain one-to-one backing through a prescribed asset mix:
70% maximum in short-term UK government securities (gilts). Issuers may hold up to 70% of reserves in short-dated gilts, generating yield to offset operational costs. Overnight repo and reverse repo transactions using eligible government securities are explicitly permitted for liquidity management.
30% minimum in Bank of England deposits. The remaining portion must be held as unremunerated deposits at the central bank. This component serves as the liquidity backstop — immediately accessible to meet redemption demands during periods of market stress.
Excess reserves. Issuers may hold up to 5% excess in backing pools, with unlimited excess reserves permitted beyond that threshold. This provision gives issuers a buffer against intraday fluctuations in redemption volumes.
Transition provision. Recognized firms at launch will be permitted to hold up to 95% of reserves in short-term UK government debt during an initial scaling period, transitioning to the steady-state 70/30 structure as they grow. Temporary shortfalls in the central bank deposit component are permitted during stress periods, subject to notification thresholds and mandatory restoration plans.
Prohibited assets. Commercial bank deposits and other asset classes are explicitly excluded from the reserve framework.
The £40 billion per-issuer cap replaces the per-user holding limits that drew sustained industry opposition during the consultation period. At approximately $53 billion at current exchange rates, the ceiling sits well above any existing sterling stablecoin issuance — the entire GBP stablecoin market had a combined capitalization of approximately $12 million as of March 2026, according to CoinGecko data.
The BoE characterized the cap as temporary — subject to regular review and potential removal once the central bank is satisfied that stablecoin adoption will not drain bank deposits at a pace that undermines credit provision to the UK economy. In practice, the ceiling provides headroom for multiple issuers to scale to meaningful size before the constraint becomes binding.
For context, the global stablecoin market stood at approximately $321 billion as of April 2026, with over 99% denominated in U.S. dollars. Tether's USDT held 57.96% market dominance at $185.46 billion, while Circle's USDC accounted for approximately $78 billion in circulation.
Beyond reserve composition, the framework imposes several operational standards:
The UK framework arrives after the EU's MiCA (fully effective since June 2024) and alongside the US GENIUS Act (signed into law in 2026). The three regimes share a common foundation — 100% reserve backing, clear redemption rights, direct issuer supervision — but diverge on structural details:
| Requirement | UK (BoE) | EU (MiCA) | US (GENIUS Act) | |---|---|---|---| | Reserve composition | 70% gilts / 30% BoE deposits | 30-60% bank deposits (varies by significance) / remainder in liquid instruments | USD cash, T-bills ≤93 days, Fed credits, overnight repos | | Holding limits | None (aggregate cap instead) | None specified | None specified | | Issuance cap | £40B per issuer | None | None | | Interest on holdings | Prohibited | Prohibited | Not explicitly prohibited | | Redemption standard | 24 hours at face value | Prompt at par value | At par value | | Yield on reserves | Permitted (gilts) | Bank deposits may earn interest | T-bills generate yield |
According to analysis published by multiple law firms in early 2026, no mutual recognition or equivalence agreement exists between any two of the three regimes. A stablecoin issuer operating across all three jurisdictions must maintain separate reserve pools, compliance teams, and reporting infrastructure. Mid-size operators face estimated incremental costs of $200,000 to $500,000 annually per additional jurisdiction.
The UK's 30% unremunerated central bank deposit requirement is a distinctive feature. Under MiCA, the bank-deposit floor ranges from 30% to 60% but those deposits can earn interest. Under the GENIUS Act, no central bank deposit requirement exists. The UK structure effectively creates a drag on issuer economics — the 30% parked at the BoE earns nothing, while competing dollar stablecoins can deploy 100% of reserves into yield-generating instruments.
Industry reaction was divided along predictable lines.
Joey Garcia, Chief Policy and Regulatory Affairs Officer at Xapo Bank, characterized the BoE's willingness to incorporate industry feedback as significant progress, noting that British regulators are setting the country on a course to maintain pace with other major jurisdictions.
Coinbase policy officials described the revised reserve mix as workable, according to industry reporting.
However, Innovate Finance, the UK fintech trade body, took a harder position, stating that the remaining 30% unremunerated deposit requirement could weaken the business case for sterling stablecoin issuance. ClearBank, the UK clearing bank that has positioned itself as infrastructure for stablecoin settlement, welcomed the progress but warned about commercial viability under the current reserve structure.
Renna Ba, Head of Ecosystem at Morph, offered a broader market perspective: "Increasingly, people aren't looking at stablecoins as crypto tokens. They are looking at them as a more efficient way to move value, particularly across borders where traditional payment systems can still be slow, expensive and fragmented."
The consultation period on the draft Code of Practice runs until September 22, 2026. The BoE intends to finalize the Code by end-2026, enabling regulated stablecoin operations to commence in 2027.
The regulatory framework arrives ahead of the market it will govern. As of March 2026, the entire GBP stablecoin sector had a market capitalization of roughly $12 million. The sole UK-issued fiat-referenced stablecoin, tokenized GBP (tGBP), carried a market cap of $1.53 million.
This stands in stark contrast to the dollar-denominated stablecoin market ($321 billion) and even the euro-denominated segment, which has grown under MiCA's regulatory clarity. The BoE's framework is designed to create the conditions for a sterling stablecoin market that does not yet exist at scale.
Parliament signed the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 into law on February 4, 2026, with full enforcement beginning October 25, 2027. This legislation makes stablecoins a regulated asset class in the UK for the first time. Firms — including those based outside the UK serving UK customers — will require FCA authorization to issue qualifying stablecoins.
Circle, which already holds FCA registration as an Electronic Money Institution, is positioned to pursue authorization for GBP-denominated issuance. Tether can continue issuing USDT to UK firms through offshore entities but would need FCA registration to integrate GBP rails or manage reserve assets from within UK borders.
The Bank of England's final stablecoin framework represents a calculated trade-off between financial stability safeguards and commercial viability. By removing individual holding caps and softening reserve requirements, the BoE addressed the most acute industry objections to its November 2025 proposals. The £40 billion issuance ceiling provides a macro-prudential safety valve against rapid deposit flight without constraining individual usage.
The central question remains whether the economics work. A 30% unremunerated deposit requirement creates structural headwinds that dollar-denominated competitors do not face. For sterling stablecoins to emerge as a meaningful payment rail, issuers must generate sufficient revenue from the 70% gilt allocation to cover operations, compliance, and the opportunity cost of the dead capital parked at the Bank of England.
The UK now has a regulatory framework. What it does not yet have is a market. The next twelve months will determine whether the rules are permissive enough to attract one.