What happened to the UK stablecoin rules?

The Bank of England eased parts of its proposed stablecoin framework. Issuers may now hold up to 60% of reserves in short-term UK government bonds and 40% in central bank deposits, instead of keeping all reserves in non-interest-bearing central bank deposits.

Why does the Bank of England stablecoin change matter for crypto investors?

The change matters because it may make the UK more attractive for stablecoin issuers. A more workable regime could help keep digital asset firms in Britain instead of pushing activity to the US, EU, or other crypto-friendly markets.

What changed from the Bank of England’s earlier 2023 stablecoin proposal?

The 2023 proposal would have required stablecoin reserves to sit fully in non-interest-bearing central bank deposits. The updated plan gives issuers more flexibility by allowing part of the reserves to sit in short-term UK government bonds, which can generate yield.

Is the UK stablecoin rule change good or bad for issuers?

It is broadly positive for issuers because it gives them a limited way to earn yield on reserves. The watch-out is that the Bank of England still wants strong safeguards, so this does not mean stablecoin firms will face light-touch regulation.

Why did crypto and fintech firms criticise the original UK stablecoin plan?

Crypto and fintech firms argued that the original plan would make sterling-backed stablecoins hard to operate profitably. Holding all reserves in zero-yield central bank deposits could have made the UK safer on paper but less competitive in practice.

UK stablecoin shift sharpens global digital finance race

Written by Isaac FrancisPublished May. 14 2026Last Updated May. 14 2026

The Bank of England has eased parts of its proposed stablecoin framework as the UK tries to protect financial stability while keeping digital asset firms within its market.

The revised approach marks a shift from the central bank’s earlier 2023 proposal, which would have forced stablecoin issuers to hold reserves only in non-interest-bearing central bank deposits.

That original model drew concern from crypto firms, fintech groups, and market participants who warned that it would make sterling-backed stablecoins difficult to operate commercially.

Under the updated plan, issuers may place up to 60% of their reserves in short-term UK government bonds while keeping the remaining 40% in central bank deposits.

The proposal also gives issuers access to transitional relief measures and a liquidity backstop, which may help firms manage pressure during periods of market stress.

The change may look like a concession to the crypto industry, but it also reflects Britain’s wider effort to stay relevant in the next phase of digital payments.

A stricter reserve model may have produced a highly secure stablecoin system, but it could also have discouraged serious issuers from launching products in the UK.

Industry feedback played a major role in the rethink, with the Bank of England receiving 46 consultation responses that criticised the earlier framework as commercially weak and globally uncompetitive.

Regulators appear to have accepted that excessive restrictions could push stablecoin activity into other jurisdictions instead of reducing the risks linked to private digital money.

The short-term gilt allowance gives issuers a limited way to generate yield while still keeping reserves in liquid and low-risk assets.

The Bank of England has avoided presenting the move as deregulation, instead framing the update around safeguards, liquidity, and alignment with international standards.

The central bank remains cautious about privately issued digital currencies, particularly if stablecoins become widely used for everyday payments.

Britain is now trying to strike a careful balance between supporting financial innovation and preventing new forms of systemic risk from building inside the payments sector.

The updated framework signals that the UK does not want to fall behind the US and EU as major economies compete to shape digital finance infrastructure.

Rather than a full retreat, the decision looks more like a policy recalibration aimed at making regulation practical enough for firms while keeping the Bank of England’s stability concerns intact.