U.K.’s New Proposals on Stablecoin Regulations: What You Need to Know
The U.K. is making significant progress in its efforts to regulate stablecoins, a move that has been closely followed by the cryptocurrency world. As part of its revised framework, the Bank of England (BoE) has proposed capping “systemic stablecoin” holdings at £20K for retail users and £30 million for businesses. These guidelines, expected to come into effect in H2 2026, are designed to safeguard broader financial systems while meeting industry demands.
Key Elements of the New Stablecoin Proposal
Under the updated guidelines, issuers of Sterling-based stablecoins must follow a reserve formula of 60/40. This means 60% of reserves should be held in interest-bearing short-term government debt like T-bills, while the remaining 40% will be parked in non-interest accounts with the bank. This contrasts with the U.S., where the GENIUS Act requires stablecoin issuers to hold 100% of their reserves in T-bills or cash equivalents, allowing them to benefit entirely from the yield.
The BoE softened its stance after industry players criticized its earlier 2023 proposal of requiring 100% non-yielding reserve backing. The changes aim to strike a balance between security and the financial viability of stablecoin issuers. According to BoE Governor Andrew Bailey, “We have listened carefully to and are grateful for the feedback received, which has shaped the proposals we are consulting on today.”
Impact on the Crypto Landscape
The proposed cap on systemic stablecoins aims to limit potential outflows from bank deposits to stablecoins, reducing the risk of financial instability. However, some have pointed out that major financial hubs like the U.S. don’t similarly restrict retail or business stablecoin holdings, making the U.K.’s approach appear more conservative.
Systemic stablecoins, such as Sterling-based versions of USDT or USDC, will fall under the purview of the BoE, while the Financial Conduct Authority (FCA) will oversee “non-systemic stablecoins” mainly used for crypto transactions. Interestingly, issuers will now be allowed to retain all accrued yield, providing them with a profitable revenue model.
What’s Next?
The consultation phase for this framework will continue until early 2026, with the final rules set to launch in H2 2026. By adopting a more cautious approach, the U.K. aims to minimize systemic risks while drawing closer to the U.S.’s regulatory framework. While these measures may appear stringent, they signal the U.K.’s intent to establish greater clarity and trust in a rapidly evolving crypto landscape.
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