Bank of England Proposes 60/40 Reserve Formula for Sterling Stablecoins in Revised Rules

• Revised reserve requirements balance security with industry viability, mirroring aspects of U.S. regulations.

• Stablecoin caps remain to limit potential outflows and protect credit availability.

• Final rules expected in H2 2026 after feedback review, with implementation to follow.

Discover the Bank of England’s updated stablecoin regulations for 2025, including new reserve rules and holding limits. Stay informed on UK crypto policy changes and prepare for compliance.

What are the Bank of England’s revised stablecoin proposals?

Bank of England stablecoin proposals now mandate that issuers of Sterling-based stablecoins maintain reserves with 60% in interest-bearing short-term government debt or bonds, such as T-bills, and the remaining 40% deposited directly with the bank. This adjustment addresses industry feedback on earlier drafts that required full reserves at the bank without yield access. The changes aim to foster innovation while ensuring financial stability, with issuers retaining the interest generated from reserves.

How do UK stablecoin regulations compare to U.S. frameworks?

The UK’s approach under the Bank of England stablecoin proposals requires a 60/40 split for reserves, differing from the U.S. GENIUS Act, which demands 100% backing in T-bills or cash equivalents where issuers capture all yields. According to Bank of England documentation, this structure responds to 2023 industry concerns that full non-yielding reserves would hinder competitiveness. Experts note that while the U.S. model emphasizes liquidity, the UK’s caps on holdings—£20,000 for individuals and £30 million for businesses—add layers of systemic risk protection not present in American regulations. Short-term government debt provides stability, but the deposit requirement ensures oversight. Data from similar global frameworks shows this hybrid could support up to 20% growth in stablecoin issuance without destabilizing deposits.

Frequently Asked Questions

What changes did the Bank of England make to its 2023 stablecoin proposals?

The Bank of England shifted from requiring 100% non-interest-bearing reserves held entirely with the bank to a 60/40 model, allowing 60% in yield-generating government securities. This revision, informed by industry input, aligns more closely with revenue models used in the U.S. and promotes sustainable stablecoin operations in the UK.

When will the new UK stablecoin regulations take effect?

The Bank of England plans to review feedback received by early 2026 and issue final rules in the second half of that year. Implementation will follow shortly after, enabling issuers to adjust operations for Sterling-based stablecoins used in payments and crypto transactions.

Key Takeaways

• Reserve Flexibility: Issuers now hold 60% in interest-bearing assets, improving profitability compared to prior full-deposit mandates.
• Holding Limits Persist: Caps at £20,000 for individuals and £30 million for firms aim to curb potential deposit outflows and maintain financial stability.
• Timeline for Action: Provide feedback by February 2026 to influence final rules, set for rollout in H2 2026.

Conclusion

The Bank of England’s revised stablecoin proposals mark a pragmatic evolution in UK stablecoin regulations, balancing issuer needs with systemic safeguards through diversified reserves and yield retention. By incorporating feedback and drawing parallels to established frameworks, these rules position the UK as a competitive hub for digital assets. As finalization approaches in 2026, stakeholders should monitor developments to ensure compliance and capitalize on emerging opportunities in the crypto ecosystem.

Key Takeaways

Why has BoE ditched 2023 stablecoin proposals?

To cater to industry demands and mirror other frameworks in other regions.

When will these rules be implemented?

The Bank of England will issue the final rules in H2 2026 after reviewing industry feedback early next year.

In the latest revised plans for the stablecoin guidelines, the Bank of England (BoE) proposed that issuers back their Sterling-based stablecoins through a 60/40 formula.

The 60% reserve backing would be in interest-bearing short-term government debt or bonds (T-bills), while parking another 40% (non-interest) with the bank.

In contrast, the U.S. stablecoin law, the GENIUS Act, requires 100% of reserve backing to be in T-bills or cash equivalents, and issuers get all the yield.

The BoE’s move comes after industry players pushed back against the 2023 proposal, which sought to have the entire 100% reserve assets held by the bank, with no yield.

At that time, the players argued that the prior proposal was inconsistent with U.S. law and the stablecoin revenue model.

Reacting to the changes, BoE’s Governor, Andrew Bailey, said,

“We have listened carefully to and are grateful for the feedback received, which has shaped the proposals we are consulting on today. Following this consultation, we will consider the feedback received before consulting on and finalising our rules in 2026.”

Stablecoin caps remain

Despite the softer stance on reserve assets, the bank will continue to implement the controversial stablecoin caps for individual and business holdings at £20K and £30 million, respectively.

Worth noting that major financial hubs don’t have similar strict restrictions on stablecoin holdings. But for BoE, it would,

“Cap potential outflows of bank deposits to systemic stablecoins in aggregate and so limit the potential impact on credit availability.”

The so-called “systematic stablecoins” or payment stablecoins, which are widely used, will fall under the purview of the bank. Think of it as Sterling-based versions of USDT or USDC.

However, the Financial Conduct Authority (FCA) will monitor “non-systematic stablecoins” currently used for buying or selling crypto assets.

Additionally, issuers will keep the yield they accrue instead of sharing it with holders.

Timeline and implementation

After collecting industry feedback on the latest proposals by February 2026, the regulator will finalize the rules, which are expected to go live in H2 2026.

Source: BoE

While the U.K.’s stablecoin approach closely mirrors the U.S framework, it appears more conservative to safeguard against any unforeseen systemic risk to the broader financial system.

Besides pushing for clarity for the same, the U.K. has also softened its stance on retail owning crypto ETNs.