The Bank of England has revised its stablecoin regulations, introducing a £40 billion issuance limit and increasing backing asset allocation to 70%.
Bank of England Updates Stablecoin Regulations
The Bank of England has revised its regulatory framework for systemic stablecoins, responding to industry feedback that highlighted potential barriers to the growth of a sterling-backed market.
In its recent policy statement and draft regulations, the central bank has eliminated limits on individual stablecoin holdings, instead implementing a temporary issuance cap of £40 billion ($53 billion) per stablecoin. This change aims to enhance market flexibility and foster innovation.
Additionally, issuers can now allocate up to 70% of their backing assets into UK government securities, an increase from the previous limit of 60%. The remainder must be held in non-interest-bearing deposits at the Bank of England. This adjustment seeks to ensure more productive use of capital while addressing concerns raised by the industry.
Sarah Breeden, deputy governor for financial stability, stated, "This is a significant step towards enhancing choice and innovation in UK payments," highlighting the framework's potential to support a robust payment system.
The £40 billion limit is intended as a temporary measure to protect credit availability, rather than to restrict user access. The Bank has noted that widespread adoption of stablecoins could impact bank deposits and lending capabilities.
These regulations specifically target "systemic" stablecoins, defined as those with enough transaction volume to pose financial stability risks. Other tokens primarily used for cryptocurrency trading will be regulated by the Financial Conduct Authority (FCA).
The Bank of England plans to accept feedback on its proposals until September 22, with the aim of finalizing regulations by the end of 2026, allowing regulated stablecoins to launch in the UK by 2027.
