Bank of England stablecoin statement marks progress, but the viability test remains
The Bank of England’s policy statement and draft Code of Practice for systemic stablecoin issuers marks a significant step in the UK’s attempt to build a serious regulatory framework for digital money. The question now is no longer whether sterling-denominated stablecoins should sit inside the regulated financial system. That point has effectively been settled. The more important question is whether the UK can design a regime which is robust enough to protect financial stability while remaining sufficiently attractive to persuade firms to issue, scale and use sterling stablecoins in practice.
That balance was at the heart of CryptoUK’s February 2026 response to the Bank’s consultation, which the Bank published towards the end of 2025. Stablecoin regulation should not be judged only by the severity of its safeguards. A technically robust framework which makes sterling issuance commercially unattractive would not deliver a safer sterling stablecoin market; it would risk leaving the UK with no meaningful sterling stablecoin market at all. That is an important distinction in a global ecosystem already dominated by dollar-denominated stablecoins.
From Holding Limits To Issuance Guardrails
The most important change in the Bank’s final policy direction is its decision not to proceed with individual and business holding limits. CryptoUK and its members argued that holding limits would create operational complexity, reduce liquidity, impair market making and make sterling stablecoins less useful for ordinary commercial activity. They would also have made the UK an outlier internationally. Replacing those limits with a temporary issuance guardrail, initially set at GBP40 billion per systemic stablecoin, is a more practical way of addressing the Bank’s concern about risks to bank funding and credit provision. It places the control at the issuer level rather than the user level, avoiding a specific friction that would have made sterling stablecoins harder to use.
The revised reserve framework also moves in the right direction. The Bank has increased the proportion of backing assets that may be held in short-term UK government debt from 60% to 70%, reducing the required share of unremunerated Bank of England deposits from 40% to 30%. That change improves the economics of issuance and suggests the Bank has recognised the importance of business model viability. It does not, however, fully resolve the issue. Unremunerated central bank deposits remain a material cost for issuers, particularly when competing stablecoin frameworks in other jurisdictions may offer more commercially flexible reserve models.
The Test For Final Rules
There is also a deeper technology-neutrality point. CryptoUK has argued in its work on tokenisation that the same-risk, same-outcome principle should apply in both directions. Where tokenisation creates additional risk, that risk should be controlled directly. But where tokenised arrangements preserve the same legal or economic substance, they should not receive worse treatment solely because the method differs. The UK’s stablecoin framework should therefore be careful not to treat economically similar activity more harshly simply because it is delivered through tokenised infrastructure rather than legacy rails.
This is not an argument for weakening safeguards. CryptoUK supports a regime with strong backing assets, reliable redemption, effective safeguarding and credible failure arrangements. Stablecoins intended to operate at systemic scale must be trusted as money, not treated as lightly regulated technology products. But safeguards need to be calibrated to the actual risks they address. Requirements on trust structures, capital, wind-down reserves and operational arrangements should protect coinholders without prescribing a single model where equivalent outcomes can be achieved through other legally robust structures.
The transition between FCA supervision and Bank of England supervision will also be critical. Firms need to understand how they move from the non-systemic regime into the systemic framework, what criteria will apply, and how supervisory expectations will change as they scale. The Bank has confirmed that it is working with the FCA on an end-to-end regulatory approach, which is welcome. The detail now needs to follow. For issuers deciding whether to build in the UK, regulatory clarity is part of the investment case.
The Road Ahead
The draft Code of Practice consultation, open until 22 September 2026, is an important next stage rather than an administrative final step. The Bank has made meaningful changes in response to industry feedback, particularly on holding limits and reserve composition. That demonstrates the value of constructive engagement. The task now is to ensure the final rules preserve that pragmatism and deliver a framework which supports financial stability, coinholder protection and the growth of a competitive sterling stablecoin market. CryptoUK will continue working with the Bank, the FCA and policymakers to help make that outcome possible.
We would like to thank our members, whose insights and contributions played a vital role in shaping the industry’s engagement with the Bank of England and supporting many of the changes reflected in its latest proposals. Through its policy, advocacy and industry engagement work, CryptoUK provides members with a platform to help shape the future of digital asset regulation in the UK. If you would like to learn more about our work and how your organisation can become involved, visit our membership page.
