The Bank of England on Monday published final rules for systemic stablecoins that would replace previously proposed individual holding limits with a temporary issuance cap for each systemic stablecoin as it seeks to balance innovation in digital payments with financial stability safeguards.

Under the revised regime, the BoE abandoned plans to limit individual holdings to £20,000 and business holdings to £10 million, opting instead for a simpler guardrail that caps the total issuance of any systemic stablecoin at £40 billion.

The bank said the measure is designed to mitigate risks of large-scale shifts from bank deposits into stablecoins while allowing unrestricted use of stablecoins for payments by consumers and businesses. The cap will be reviewed regularly and removed once concerns over impacts on bank credit provision have been addressed.

The framework establishes the prudential standards that systemic stablecoin issuers will face once recognized by HM Treasury.

Bank of England eases stablecoin reserve requirements

In response to industry feedback, the BoE relaxed its proposed reserve requirements, allowing systemic stablecoins to hold 70% of backing assets in short-term UK government debt and 30% in unremunerated central bank deposits, compared with a previously proposed 60/40 split.

Issuers must maintain full one-to-one backing at all times and may use overnight repo and reverse repo transactions backed by eligible government securities to manage liquidity. Commercial bank deposits and other asset classes remain prohibited due to financial stability concerns.

Temporary shortfalls in central bank deposits will be permitted during periods of stress, subject to notification thresholds, liquidity controls and restoration plans.

Bank of England bans interest payments on systemic stablecoins

The BoE said systemic stablecoin issuers would be required to safeguard customer assets through two statutory trusts, provide face-value redemption within 24 hours, and refrain from paying interest on stablecoin holdings under its final regulatory framework.

Issuers may hold up to 5% excess assets in backing pools and unlimited excess reserves, while third-party custodians must meet reconciliation and legal segregation requirements. The framework also envisages direct access to payment systems to support timely redemptions and interoperability.

The UK central bank said firms recognized as systemic at launch would be allowed to begin with as much as 95% of reserves invested in short-term UK government debt before transitioning to the steady-state reserve structure as they scale.