The Bank of England has published a policy statement and draft rulebook for sterling stablecoins that become large enough to matter for the whole financial system. This article explains what a stablecoin is, what the Bank has decided so far, who will supervise issuers and what is still open.
What is a sterling stablecoin?
A stablecoin is a digital token designed to hold a steady value against a national currency, in this case the pound. The idea is that one token can always be exchanged for one pound, so it can be moved quickly between digital wallets without the price swings associated with other crypto-assets.
That promise depends on the issuer. The Bank of England’s policy statement describes one-to-one backing for redemptions on demand, and says its approach is meant to ensure redemptions are delivered “promptly and reliably”. In plain terms, the issuer must hold assets behind the tokens so holders can swap them back for money.
A stablecoin is not the same as a bank deposit, and it is not the same as a central bank digital currency. It is a private-sector liability, which is why the quality of the backing assets and the rules around redemption matter so much.
What did the Bank of England publish, and when?
According to the Bank of England, it published a policy statement and a draft Code of Practice for systemic stablecoin issuers on 22 June 2026. The draft Code is an appendix to the policy statement, and the Bank invited feedback by 22 September 2026.
The Bank says it intends to finalise the Code of Practice by the end of 2026, and that regulated stablecoins can operate in the UK from 2027. Further supporting materials will be consulted on and published in 2027, according to the policy statement.
The word “systemic” is important. The Bank’s regime applies to stablecoins used widely enough as a means of payment that a failure could disrupt the wider economy. Smaller stablecoins fall under a different regime, covered below.
Why were holding limits dropped?
The Bank’s earlier consultation, published in 2025, proposed temporary limits on how much of a systemic stablecoin any one person or business could hold. The aim was to stop large sums leaving bank deposits too quickly, which could reduce the money banks have available to lend.
In June 2026 the Bank said it will not introduce those holding limits. Instead, it is applying a temporary issuance guardrail to each systemic stablecoin, initially set at £40 billion. The guardrail is to be reviewed regularly and removed once risks to credit provision have been addressed. According to the Bank, the change allows unrestricted use by households and businesses.
The distinction is practical. A holding limit constrains what you can keep in a wallet. An issuance guardrail constrains how many tokens a single issuer can put into circulation overall.
Illustrative arithmetic
If each token is worth £1, a £40 billion guardrail equates to 40 billion tokens. A household holding £5,000 of tokens would own 5,000 ÷ 40,000,000,000 = 0.0000125% of that maximum supply. The example is hypothetical and does not describe any actual product; it simply shows that the guardrail is a ceiling on the system, not on any individual.
Who will regulate stablecoin issuers?
The regime is shared. According to the Bank’s joint approach paper with the Financial Conduct Authority, HM Treasury decides whether an issuer should be recognised as systemic, after consulting the Bank, the FCA and the Payment Systems Regulator. The Bank advises on criteria such as transaction volumes and values, how easily the service could be replaced, and how interconnected it is.
The paper then splits responsibilities:
| Area | Lead |
|---|---|
| Backing assets, capital and reserve requirements, safeguarding, failure arrangements, issuance guardrail | Bank of England |
| Consumer Duty, conduct of business, financial crime, complaints, senior managers regime | Financial Conduct Authority |
| Operational resilience, governance, outsourcing, reporting, redemption, remuneration | Shared: FCA rules and the Bank’s Code both apply |
The paper adds that issuers “will remain regulated by the FCA irrespective of recognition or designation”, and that the FCA will regulate all UK-issued qualifying stablecoins. The Bank says the FCA alone supervises non-systemic stablecoins, such as those used to buy and sell crypto-assets.
How must the backing assets work?
Backing assets are the reserves that stand behind each token. The Bank says it revised its backing-asset proposals after feedback, to support issuers’ business models and to bring the regime closer to banking-sector liquidity norms.
The Bank’s news release explains the logic of the mix. Part of the backing can be held in short-term UK government debt, which earns interest. The remainder is held as deposits at the central bank, which help issuers meet redemptions promptly. The Bank also intends to introduce a Central Bank Liquidity Facility as a backstop source of liquidity for issuers.
Those safeguards matter because a stablecoin is only as stable as its ability to meet redemptions. If many holders asked for their money back at once, an issuer would need cash-like assets, not assets that take time to sell.
What does this mean for payments and open banking?
Supporters argue that tokens could make payments faster or programmable, and could add competition to existing rails. Sceptics point to the risk that money moves out of bank accounts and weakens lending, which is exactly what the guardrail is meant to contain.
For everyday consumers, bank transfers already settle quickly. Our explainer on how modern bank transfers work shows how existing systems handle this, and what open banking means for UK consumers covers how account data and payment initiation are already opening up the market. Any stablecoin would need to offer something those systems do not.
Fraud is another consideration. Reimbursement protections attach to specific payment systems, as described in our look at what the evidence shows on app fraud reimbursement. Whether and how equivalent protections would apply to stablecoin payments is the kind of detail that rule-makers still have to settle, and readers should not assume the same safeguards carry across.
Would stablecoins be protected like bank deposits?
The pages reviewed for this article do not set out a deposit-style guarantee for stablecoin holders. That is a meaningful gap in what has been published so far, and it should not be filled by assumption.
Bank deposits sit within a separate statutory scheme, explained in our guide to how the deposit protection limit works. A stablecoin is a different kind of claim on an issuer. Its safety rests on the backing assets, the safeguarding rules, the redemption promise and the failure arrangements, which the Bank lists as part of its remit, rather than on a deposit guarantee.
Anyone considering holding such tokens in future would need to read the issuer’s disclosures and check what protection, if any, applies. This publication does not suggest that anyone should or should not.
What happens next for UK stablecoins?
Several steps remain. The Bank intends to finalise the Code by the end of 2026. HM Treasury must then decide which, if any, issuers to recognise as systemic. The Bank and FCA have further guidance and consultations to come, including on backing-asset trust arrangements, with final supporting materials due in 2027.
For now, the picture is of a regime that is settled in outline but not in detail. The headline choices are clear: no holding limits, a £40 billion guardrail per systemic coin, a split between central bank deposits and government debt in the reserves, and joint Bank and FCA oversight.
Conclusion: a regime still taking shape
The Bank of England’s June 2026 statement moves sterling stablecoins from concept towards a defined rulebook, with the final Code expected by the end of 2026 and regulated operation possible from 2027. The decision to drop holding limits in favour of an issuance guardrail shows regulators trying to balance innovation against the risk to bank lending. Until the final rules and any recognition decisions arrive, the details that matter most to consumers, including protections and redress, remain to be settled.
This article provides general information, not personalised financial advice. Rules, rates and regulatory proposals change.
Sources: Bank of England
