UK Stablecoin Rules Take Shape: Bank of England Drops Holding Limits for a £40 Billion Issuance Guardrail, and the BoE and FCA Set Out How Systemic Issuers Will Be Jointly Regulated

The United Kingdom has taken two significant steps in setting up its regulatory regime for stablecoins, digital tokens designed to hold a stable value, usually backed by reserves of conventional assets. In June 2026 the Bank of England published a policy statement and a draft Code of Practice for sterling-denominated systemic stablecoin issuers. Soon afterwards, the Bank and the Financial Conduct Authority (FCA) set out how the two authorities will jointly regulate issuers that become systemic. Together they reveal a regime that is somewhat softer than first proposed.

The Bank's policy statement, dated June 22, 2026 according to PwC's summary, responds to a consultation the Bank launched in November 2025. Its most prominent change is to holding limits. The earlier proposal would have restricted how much of a systemic stablecoin an individual or business could hold, to protect banks from losing deposits too quickly. After feedback, the Bank dropped the holding limits. In their place is a temporary issuance guardrail of £40 billion per systemic stablecoin. PwC says the guardrail is not a trigger for systemic designation. Lewis Silkin's commentary adds that the Bank expects to remove the guardrail once it is satisfied that risks to credit provision have been effectively mitigated. Commentators regard the new approach as more workable than the old one, mainly because it drops individual holding limits.

The backing assets, the reserves that stand behind each token, were also changed. According to PwC, the share that must be held as non-interest-bearing deposits at the central bank falls from 40% to 30%, and the share that can be invested in short-term UK government debt rises to 70%. For issuers this matters because assets held at the central bank earn no interest, while government debt does, so a lower central bank share improves the economics of issuing a stablecoin. The Bank also plans a future Central Bank Liquidity Facility for eligible systemic issuers, which would give them access to liquidity in stress.

The draft Code of Practice covers backing assets and safeguarding, capital and reserves, issuance, legal claim and redemption, remuneration, and the temporary issuance guardrail. The consultation on it closes on September 22, 2026, and the Bank aims to finalise it by the end of 2026, after which it applies to recognised systemic issuers. Further guidance and supervisory expectations follow during 2027, and PwC reports that regulated stablecoins can operate in the UK from 2027.

The second step is the joint approach. In a document published around the end of June, which Lewis Silkin discussed on July 2, the Bank and the FCA explained that systemic issuers will not be in a wholly separate regime. The UK is building one integrated, two-part framework. The FCA regulates all UK-issued qualifying stablecoins and, in due course, their use in retail payments. If a stablecoin is widely used in payments and may pose risks to UK financial stability, HM Treasury may recognise its issuer as systemic, and the Bank and FCA then regulate it jointly. The Bank advises the Treasury, assessing each case holistically and looking forward, with factors that include scale, nature of use, substitutability, interconnectedness and the Bank's own use of the stablecoin in its monetary role.

An issuer can be recognised as "systemic at launch" if it is not yet at systemic scale but is likely to reach it. Non-systemic UK issuers stay within the FCA regime. Responsibilities differ: the FCA's rules address consumer protection, market integrity, competition and international competitiveness, while the Bank's requirements target financial-stability risks from stablecoins used as money at scale. The authorities aim to align requirements where appropriate, but full alignment is not expected, and systemic issuers should expect more stringent rules.

The approach document also covers transition. It explains which FCA rules continue after recognition, which may be disapplied, how Bank requirements are phased in and how supervision is allocated. PwC says firms may face transition periods of 12 to 36 months. The FCA and Bank will consult later this year on how FCA rules apply once the Treasury recognises a systemic issuer. Other regulators are involved case by case: the Prudential Regulation Authority where an issuer is part of a bank group, and the Payment Systems Regulator for payment systems it covers, though the FCA is expected to take over the latter's responsibilities.

The Code of Practice is still a draft, with a consultation open until September 22, and the further consultation on FCA rules is yet to come, so firms should treat the details as provisional.

The legal basis is the Financial Services and Markets Act 2023, which amended the Banking Act 2009 to extend the Bank's remit to digital settlement assets, including systemic stablecoins. The focus is sterling-denominated stablecoins, but the approach also covers non-sterling systemic stablecoins if their use becomes widespread in the UK.

For consumers, the immediate effect is limited: regulated stablecoins are not expected until 2027. For businesses considering issuing or accepting them, the message is to plan early for the systemic threshold, since partnerships and distribution can bring scale quickly. Lewis Silkin concludes that firms with plans to scale stablecoin payments should treat systemic regulation as a design consideration now.