What to know:
- BoE drops per-wallet caps, sets £40B total issuance limit per stablecoin to curb systemic risk.
- Slightly relaxed backing asset requirements, but still mandates high-quality, liquid reserves for 1:1 redemption.
- Final framework coming after more talks, giving clarity but creating interim uncertainty for issuers.
Systemic stablecoins have been on the UK’s radar for how they ought to be regulated and controlled. The Bank of England (BoE) released its policy structure and draft rules for systemic stablecoins, which are quite different from the ones it considered last year.
These changes indicate that UK-based crypto firms and blockchain issuers should expect a move from strict and top-down controls to more risk-based and desired outcomes which will affect stablecoin design, reserve management, and market access.
From Individual Caps to Issuance Limits
After ditching the plan to limit per-user stablecoin holdings, the Bank of England came up with a fresh proposal for a total issuance limit per stablecoin, the initial figure being 40 billion.
The new approach tackles the industry’s argument that if caps were imposed on per-wallet transactions, liquidity would get fragmented, and it would become difficult for institutions to adopt. The bank intends to control systemic risk by focusing on the overall exposure, at the same time not limiting the use of retail or corporate cases across payments and settlement.
Also Read: Bank of England Advances UK Stablecoins and Digital Payment Rules
BoE Lowered Reserve Backing Thresholds
Apart from limiting the amount of issuance, the BoE also, to some extent, loosened the requirements for reserve backing assets. Although the draft regulations continue to require that reserves must be of very high quality and liquid to support redemption at 1:1, there is more leniency than in the draft from last year.
In turn, this shift may lessen the hassle of operations for stablecoin issuers while still maintaining the guards against bank runs which have been among the main issues of concern for blockchain-based money and RWA tokenization.
Also Read: Bank of England May Ease Sterling Stablecoins Rules Amid Concerns
Timeline and Next Steps
The Bank of England plans to have the rules finalized by the end of 2026 after more discussions. The longer timeline helps give issuers a clear picture, but at the same time, there will be a span of regulatory change. This interim period may also create uncertainty for firms trying to plan product launches or compliance roadmaps.
Also Read: Pump.fun’s New Crypto Bounty Feature Under Fire Over Risky Stunts
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