The Bank of England has released updated regulations for systemically important stablecoins. The regulator has revised the collateral and limit requirements for major issuers.
The authority has decided to ease the collateral structure for digital assets. Previously, it was proposed that 40% of funds be held in interest-free deposits at the central bank. In the final version, this reserve requirement has been reduced to 30%. The remaining 70% can be held in short-term UK government bonds with maturities of up to six months.
The regulator has ruled out allowing deposits in commercial banks to be used as collateral. In the authority's view, this poses risks to financial stability in the event of a crisis.
Instead of individual ownership limits for citizens and businesses, the Bank of England will implement an overall issuance cap. For a single stablecoin, this limit will be set at £40 billion, referred to as a temporary "safeguard." As the financial system adapts, the limit is expected to be increased or completely lifted.
Issuers are required to ensure the right to redeem "stablecoins" for fiat currency within 24 hours of a request. Payments must be made at face value.
To support the sector, the Bank of England will launch an emergency liquidity mechanism in 2027. Issuers will be able to obtain loans from the central bank against government bonds as collateral.
The regulator plans to finalize the rule set by the end of 2026. The requirements will apply to companies deemed systemically important to the UK economy.
This document has been prepared in collaboration with the Financial Conduct Authority. The two agencies will soon publish a framework for joint market regulation.
Political Context
The publication of the rules coincided with a political crisis in the country. Prime Minister Keir Starmer resigned following the Labour Party's defeat in local elections.
The resignation was prompted by economic issues. Inflation in the UK has risen due to energy prices and the blockade of the Strait of Hormuz. Andy Burnham may become the new head of government.
It is worth noting that in May, it was announced that the Bank of England would focus its future strategy on RWA to modernize the country's economic sector.