The Bank of England (BoE) has finalized its policy framework for systemic stablecoins denominated in British Pounds, shifting to a split between government debt and central bank deposits. According to the BoE, this update replaces proposed holding limits with a £40 billion issuance guardrail to simplify implementation for issuers while maintaining financial stability.
How the Bank of England is Adjusting Backing Asset Rules
Regulators are moving away from the previous 60/40 asset composition model. The new policy mandates that issuers hold a majority of assets in short-term UK government debt and the remainder in unremunerated central bank deposits. The BoE confirmed that overnight repo and reverse repo transactions are permitted, provided they utilize eligible government securities with a residual maturity of no more than six months.
To provide flexibility, the BoE is allowing a limited 5% excess in backing asset pools. Third-party custody requirements have also been clarified to ensure that coinholders’ assets remain protected under a statutory trust structure. This framework establishes two distinct trusts: one dedicated to safeguarding individual holdings and another designed to facilitate an orderly wind-down process should an issuer fail.
What Changes for Issuers Regarding Disclosure and Capital?
Systemic stablecoin issuers will face a dual regulatory approach. The BoE’s disclosure framework leans heavily on the Financial Conduct Authority’s (FCA) existing requirements for systemic firms. However, the BoE reserves the right to impose supplementary disclosure rules if it identifies gaps that could threaten market integrity.
Capital and reserve requirements are also being refined. The BoE stated these updates align the UK regime with international standards. By replacing rigid holding limits with a £40 billion “guardrail,” the central bank aims to reduce the operational complexity that previously hindered issuer compliance.
Future Timeline and Regulatory Cooperation
The transition toward a fully regulated stablecoin environment involves ongoing coordination between the BoE and the FCA. The regulators intend to publish a joint document outlining their combined approach to oversight shortly.
The current consultation period for the draft code of practice concludes on 22 September. Following this feedback window, the BoE plans to finalize the code by the end of this year. Additional supporting materials are scheduled for release in 2027, marking the next stage in the UK’s integration of digital asset regulation.
Frequently Asked Questions
- What happens to coinholder funds if a stablecoin issuer fails?
The BoE mandates a statutory trust structure. One trust is specifically designed to protect coinholders’ holdings, while a second ensures an orderly return of those funds during a wind-down. - What is the new asset backing requirement?
Issuers must maintain a split, consisting of short-term UK government debt and unremunerated central bank deposits. - When will the new code of practice be finalized?
The Bank of England intends to finalize the code by the end of 2024, following the close of the feedback period on 22 September.
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