Bank of England Announces New Framework for Sterling Stablecoins

The Bank of England has declared its intention to support the development of sterling-denominated stablecoins, positioning itself as the primary banking institution for these digital assets. This announcement follows a policy statement released on June 22, 2026, which revises earlier proposals and introduces a temporary issuance cap of £40 billion for each stablecoin, a significant shift from previous restrictions that limited individual holdings.

The updated framework includes a draft Code of Practice for stablecoin issuers, aiming to ensure that these digital currencies can achieve systemic scale while maintaining user protections. Notably, the Bank has increased the proportion of reserves that can be held in short-term UK government debt from 60% to 70%, allowing issuers to earn interest while still ensuring liquidity through deposits at the central bank.

Deputy Governor Sarah Breeden emphasized the importance of balancing prompt redemption for users with the need for central bank support. The full implementation of the new framework is expected by the end of 2026, with stablecoin operations anticipated to commence in 2027. This timeline provides issuers with approximately 18 months to prepare their structures and compliance measures before the new rules take effect.

The Bank of England's shift from a cautious to a more cooperative stance reflects its recognition of the growing interest in stablecoins and the need for clear regulatory guidelines. By establishing a defined issuance cap and reserve requirements, the Bank aims to foster a stable environment for the burgeoning market of sterling stablecoins, while still exercising oversight to protect the traditional banking system.

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Source: KLEA News