One systemically important issuer, two regulators: Bank of England finalises systemic stablecoin policies and proposes joint regulatory approach with the FCA

The Bank of England published its systemic stablecoin policy statement on 22 June 2026 (the Policy Statement), which includes a consultation on a draft Code of Practice (the Code). The Policy Statement and Code reflect feedback the Bank of England received in response to the proposals in last year’s systemic stablecoin consultation (the Consultation), which we covered in our previous briefing. Many of the recommendations made in the House of Lords Financial Services Regulation Committee’s (FSRC) 3 June 2026 report (which we covered separately) are now addressed in the Policy Statement.

In this briefing, we identify the key takeaways from the Policy Statement and assess the finalised policy positions against those proposed in the Consultation, and we then consider the Bank of England’s and FCA’s joint approach document (the Joint Document), published on 30 June 2026, which explains how the two regulators propose to collaboratively supervise systemic issuers in practice. The Joint Document is itself a consultation open for comment until 30 September 2026. Taken together, the two publications move the systemic regime from policy design towards operating reality. 

As a reminder, the Bank of England will supervise stablecoin issuers where they are recognised by HM Treasury (HMT) as systemic (whether recognised as such at launch or a period of time after issuance). “Systemic stablecoins” are expected to be those stablecoins which either are or will become widely used for everyday retail and corporate payments and could therefore pose risks to UK financial stability. The regime will not capture stablecoins used for today’s predominant use case, the buying and selling of cryptoassets. In due course, the FCA will also regulate the use of stablecoins in retail payments.

Two significant changes

The two most significant policy revisions described in the Policy Statement relate to backing asset composition and holding limits. The revisions follow extensive engagement with industry as well as the recommendations set out in the FSRC report.

Backing assets: A more workable composition requirement

The Consultation’s proposed backing asset composition requirements have been relaxed so that 30% (down from 40%) of a systemic stablecoin’s backing assets will need to be held as unremunerated central bank deposits. The remaining 70% may be held in short-term UK government debt securities with a residual maturity of up to six months. Issuers will be able to earn a return on the remaining 70% of backing assets held in UK short-term government debt securities (although the central bank deposit share will remain unremunerated). The change follows the Bank of England’s reassessment of its estimates of potential short-term redemption pressures. However, the Bank is unlikely to reduce this requirement further as it judges that this would “materially weaken liquidity protection and increase risks of disorderly asset sales in stress.”

Issuers will be required to satisfy the central bank deposit requirement on a “best endeavours” basis. While the Policy Statement acknowledges that temporary deviations may occur, the Bank of England expects to be notified if a systemic stablecoin issuer’s deposits: (i) fall below 25% of backing assets required to maintain the 1:1 value for more than five consecutive business days; or (ii) fall below 20% at any point in time. Those two thresholds are, in effect, the compliance triggers that treasury and monitoring systems will need to be built around. Issuers will be required to maintain a backing assets risk management framework. This will need to cover a liquidity management policy enabling the appropriate management of liquidity risks and concentration risks.

Issuers will also be permitted to undertake overnight repurchase and reverse repurchase agreements with sterling-denominated UK government debt securities that are permissible as backing assets. Systemic stablecoin issuers will be permitted to monetise their sterling-denominated UK government debt securities through repo agreements, enabling issuers to generate liquidity where needed to meet heightened redemption demand. However, the Bank of England expects the majority of the 30% deposit requirement to be met through permanent cash held by the issuer at the Bank, rather than repo proceeds. Reverse repos are permitted in order to lend liquidity (where that liquidity is not required to meet the 30% central bank deposit requirement), using sterling-denominated UK government debt securities with a maturity of up to six months as collateral. A systemic issuer must maintain 1:1 backing of stablecoins at all times, and therefore any reverse repo must be over-collateralised in line with standard market conventions to reflect this. 

Holding limits dropped in favour of a £40bn issuance guardrail

In light of significant operational concerns raised by a majority of Consultation respondents, as well as a recommendation by the FSRC to reconsider the approach, the Bank of England will no longer proceed with the proposed per-person and per-business systemic stablecoin holding limits (£20,000 and £10m respectively). Instead, a temporary initial maximum issuance “guardrail” of £40bn will apply to each systemic stablecoin. The Code proposes to require issuers to notify the Bank of England if they breach, or reasonably expect to breach, this guardrail. This marks a significant departure from earlier proposals. Issuers now have a single, easily measurable issuance cap to comply with, rather than an obligation to monitor amounts held by every individual holder.

The guardrail is temporary. It will be reviewed regularly and the Bank of England expects to loosen and remove it once the Bank of England is satisfied that the risk to the provision of credit to the economy has been effectively mitigated. The Policy Statement explicitly states that the £40bn figure should not be read as an indication of the point at which a stablecoin becomes “systemic”, as that holistic determination will be made separately by HMT (as outlined below in more detail). The Policy Statement also acknowledges that capping supply could, in theory, push a popular coin’s secondary-market price above par, although the Bank of England considers this de-pegging risk manageable given the sustained inflows that would be needed.

Clarified policy positions

The Policy Statement provides additional detail on the Bank of England’s position across other systemic stablecoin policy areas, including:

• Capital: the Bank of England has kept the international financial market infrastructure standards (the CPMI-IOSCO Principles for Financial Market Infrastructures) as its baseline for capital requirements, but updated the approach to follow new CPMI-IOSCO guidance, and to avoid double-counting of risks across the general business risk and wind-down reserve. The minimum capital requirement will be the higher of six months of operating expenses or the cost of recovery plus orderly wind-down. This measure also acts as an early-warning trigger. Issuers must tell the Bank of England when their capital falls below 110% of the minimum requirement, giving the regulator a window to act before a firm is actually under-capitalised. For capital planning purposes, 110% of the minimum is therefore the number to monitor, not the minimum itself.
• Statutory trust: the Bank of England has confirmed it will proceed with its proposal requiring issuers to hold backing assets on statutory trust, clarifying that there will be two trusts: a backing assets trust and a wind-down reserves trust. The first trust holds the backing assets and financial-risk reserve for the benefit of systemic stablecoin holders, and is intended to cover certain risks to ensure that par value of the stablecoin is maintained. The second is intended to mitigate risks to coinholders in the event of the issuer's failure e.g. insolvency costs, the mechanics of returning funds to coinholders or transferring the business to another provider and any shortfall in the backing assets pool.
• 24-hour redemption deadline: the Bank of England will carry forward its proposal requiring coinholders to be granted redemption rights at face value. Redemption requests must be processed as soon as practicable, and in any event within 24 hours of receipt. The 24-hour clock starts on receipt of a “full redemption request”, meaning the point at which the issuer has received the request, completed anti-money-laundering and know-your-customer checks and received the stablecoins into its wallet.
• Features of redemptions: issuers may not suspend redemptions for any reason, including operational disruptions, although the Bank of England retains supervisory powers to direct a suspension.
• Rewards: the prohibition on paying interest or income to coinholders in connection with holding or retaining a stablecoin is maintained. It is not directed at benefits, incentives, rebates, discounts and other activity-based rewards consistent with the use of a stablecoin as a means of payment, so payment-linked loyalty and cashback schemes are permitted. However, rewards calculated by reference to a holding period, including third-party payments contingent on issuer profits, are likely to breach the prohibition. The distinction will matter for product design. Reward economics need to be tied to payment activity, not balances.
• Direct payment system access: the Bank of England maintains its expectation that systemic issuers access payment systems directly rather than through a sponsor bank. Details of the transition to direct access for issuers moving into the Bank of England’s systemic regime are provided in the Joint Document (see Section E below).
• Systemic at launch step-up: the Policy Statement provides further detail of the step-up approach for issuers that are systemic at launch. Such issuers may hold up to 95% of their backing assets in short-term UK government debt while they scale, with the remaining 5% in unremunerated central bank deposits. The proportion held in short-term government debt is then reduced as the issuer scales, moving towards the standard 30%/70% split, with capital and reserve rules applied proportionately. The design is intended to support the business viability of a new issuer while it grows to systemic scale.
• Transition from FCA solo regulation: the Policy Statement confirms a typical 12- to 36-month transition into joint regulation and that the step-up approach does not apply to transitioning issuers. The process is explained in the Joint Document and summarised in Section E below.
• Failure: in the event of failure of a systemic stablecoin issuer, the Bank of England could apply to the court to have the issuer placed into a special administration regime designed for financial market infrastructure (known as the FMI SAR). Following legislation enabling the Bank to require issuers to hold backing assets and relevant reserves on statutory trust and to maintain robust safeguarding practices, the Bank expects to consult on the detail in relation to the failure of a systemic stablecoin issuer and consider whether additional requirements are needed to support operational and contractual continuity of services in the event of the FMI SAR.

Unchanged policy positions

A number of confirmed positions will shape structuring decisions for global groups:

• Non-sterling stablecoins: the Bank of England considers that in relation to non-sterling-denominated stablecoins issued from outside the UK, it would be suitable to defer to the home authority’s regulatory and supervisory framework, if the framework delivers similar outcomes to the Bank’s requirements and if the Bank is satisfied there are sufficient cooperation arrangements in place. That will require the Bank to assess the home authority’s framework and requirements for: (i) coinholders’ legal claim against the issuer, including rights in insolvency; (ii) redemptions in a timely manner; and (iii) backing of stablecoins in full with highly liquid assets.
• Multi-issuance models: the Bank of England does not regard cross-border multi-issuance models (where multiple legal entities subject to different regulatory requirements issue stablecoins that are meant to be fully fungible across borders) as suitable for systemic UK use, because fragmented reserves could leave a coin unable to meet redemptions in stress. It prefers single-issuance coins backed by a single reserve. Global groups running multi-issuance models elsewhere should not assume that structure can simply be extended to a UK systemic sterling coin.
• Location requirements: sterling-denominated systemic stablecoins will need to be issued by UK entities. The Bank of England considers that the best way to mitigate risks to UK financial stability is to require subsidiarisation. This means non-UK-based, sterling-denominated systemic stablecoin issuers should set up in the UK as subsidiaries to carry out business and issuance activities in the UK and with UK-based consumers, both directly and through intermediaries.
• Public permissionless ledgers: the Bank of England will allow systemic issuers to use public permissionless ledgers, provided they meet the Bank’s expectations and ensure trust and confidence in money. The practical challenge, as we noted when the Consultation was published, is that the issuer remains accountable for risks arising on a decentralised network it does not control, so issuers should expect exacting supervisory scrutiny of resilience and settlement finality.

Policy positions being finalised

Two other areas remain open, both going to how a systemic issuer manages liquidity and disclosure:

• Central bank liquidity facility: the Bank of England has committed to a backstop facility enabling systemic issuers to monetise gilts held as backing assets and support redemptions in exceptional scenarios, through short-term collateralised loans of central bank deposits against sterling-denominated UK government debt. It is framed as a last resort, with further details to follow in 2027, so it should be treated as a stress backstop rather than a substitute for day-to-day liquidity planning.
• Disclosures: the Bank of England intends to rely on the FCA’s disclosure requirements as the primary measure, but systemic issuers may be required to make supplementary disclosures where the Bank of England determines this is necessary to address a gap.

The Bank and FCA’s joint approach: Scope, allocation and transition

Systemic stablecoins, those that are widely used in payments and may therefore pose risks to UK financial stability, will be regulated jointly by the Bank of England and the FCA, once recognised by HMT. Practical points covered by the Joint Document include the proposed allocation of responsibility between regulators, what requirements apply while an issuer transitions into the systemic regime and the proposed approach to regulating issuers recognised as systemic at launch (SaL).

The headline is that recognition as a systemic stablecoin issuer will not trigger a handover from the FCA to the Bank of England. Instead, the Bank of England will assume responsibility for prudential regulation and other key elements of the regime.

The perimeter is function-led

The starting position is that the function an entity performs in practice, not the label attached to it, will determine which authority regulates its activities. A group issuing a stablecoin may, for example, also operate a payment system, provide infrastructure or offer custody, and each of those functions receives distinct regulatory treatment. The Joint Document maps which authorities have remit over each type of firm:

• Payment system operators and infrastructure providers using digital settlement assets (DSAs) sit within the Bank of England’s and Payment Systems Regulator’s (PSR) remits but are not regulated by the FCA (at least until the PSR is consolidated into the FCA, at which point the FCA will assume responsibility for the functions performed by the PSR, as outlined in our previous post).
• DSA issuers and custodians, which include stablecoin issuers and custodians, could be regulated by all three authorities. Groups offering end-to-end stablecoin services (e.g. issuance, wallets and payment rails) therefore need to assess which regulated function each group entity performs, and in respect of which cryptoassets.

From 25 October 2027, when the new cryptoasset regime takes effect in full, the FCA will regulate all qualifying stablecoin issuance from a UK establishment. The FCA will not consider issuance from a non-UK establishment to constitute the regulated activity of qualifying stablecoin issuance. However, such non-UK firms could still potentially be subject to other FCA requirements, including the Admissions and Disclosures Designated Activities Regime (DAR), the Financial Promotions Order (FPO) and authorisation requirements relating to other non-issuance regulated cryptoasset activities.

The Joint Document also clarifies that overseas issuers of a systemic sterling-denominated stablecoin must establish a legal entity in the UK. For a systemic non-sterling overseas stablecoin issuer, the Bank of England may defer to the home authority’s framework where that is the most appropriate means of protecting UK financial stability, although deference is conditional on the home regime delivering similar outcomes and on sufficient cooperation arrangements being in place between the relevant authorities.

Proposed allocation of responsibilities

The Joint Document proposes the following allocation of responsibility for the supervision of jointly regulated systemic stablecoin issuers:

• FCA: remains the lead authority for conduct-facing matters, including the Consumer Duty, A&D, MARC, SMCR, financial crime and complaints.
• Bank of England: leads on financial stability matters, applying its Code to backing assets, capital and reserve requirements, safeguarding, failure arrangements and the temporary issuance guardrail.
• Shared responsibility: for certain areas, both regulators’ rules will apply simultaneously, including requirements related to operational resilience, governance, outsourcing, reporting, and issuance, legal claim and redemption.

The Joint Document acknowledges that, in areas of shared responsibility, equivalent rules are not fully aligned. The authorities accept that full alignment is neither necessary nor always appropriate, both because they act pursuant to distinct statutory objectives and because they consider that systemic issuers warrant more stringent requirements. Redemption is cited as one area where the rulebooks impose dissimilar requirements (the FCA requires redemptions by the end of the next business day, while the Bank of England requires completion within 24 hours, and in real time wherever possible). The Joint Document contains a table setting out other key differences across the two rulebooks which we replicate below.

However, the burden of complying with two rulebooks should ultimately be alleviated once the FCA specifies which of its rules will be disapplied for systemic issuers to avoid conflicts with the Bank of England’s requirements. The Joint Document signals that a consultation on disapplication will follow, but only once both sets of requirements are settled and once the Bank of England’s Code of Practice has been finalised (the Bank of England’s intention is to update its existing Recognised Payment Systems Code of Practice to reflect its application to systemic stablecoin issuers). Overlap is to be managed through clear allocation of objectives, coordinated supervisory activity and information sharing under the Payments Memorandum of Understanding, with differences resolved through escalation between the authorities, each retaining its own decision-making powers.

Areas where the FCA is the lead authority and the following FCA rules are applicable	Areas of overlapping responsibility across authorities and where both FCA rules and the Bank Code of Practice (to be updated) applies	Areas where the Bank is the lead authority and the Bank’s Code of Practice applies
Consumer Duty Conduct of business Admissions and Disclosures Market Abuse Regime for Cryptoassets (MARC) Senior Management and Certification Regime (SMCR) Financial crime Environmental, Social and Governance (ESG) Complaints and access to FOS Conflict of interest Whistleblowing Fit and Proper Test for Employees and Senior Personnel (FIT), Code of Conduct (COCON), Continuing Professional Development (CPD), Training and Competence (TC), General Provisions (GEN)	Operational resilience Governance Internal and external audit Risk control Outsourcing Record keeping Reporting Issuance, legal claim and redemption Remuneration	Backing assets Capital and reserve requirements Safeguarding Failure arrangements Temporary issuance guardrail

Recognition: The trigger and the run-up

HMT is responsible for recognising payment systems for supervision by the Bank of England under the Banking Act 2009 and it may do so in relation to a stablecoin issuer that is an operator of a systemic payment system using DSAs (or where the issuer is a systemic DSA service provider or provides essential services to a systemic payment system or to a systemic DSA service provider). HMT must consult relevant authorities before making a recognition order or specifying a service provider and in practice, we expect that the Bank of England may recommend stablecoin issuers for recognition. The Bank of England’s “Recognition Criteria” include transaction volumes and values, the nature of transactions, substitutability, interconnectedness and its use by the Bank of England in the course of its role as a monetary authority (see our previous post for a fuller description of the criteria). To make a recognition order, HMT must be satisfied that deficiencies in, or disruption to, the payment system or the services provided would be likely to: (i) threaten the stability of, or confidence in, the UK financial system; or (ii) have serious consequences for business or other interests throughout the UK.

The Bank of England’s recommendation to HMT will be holistic and forward-looking, and issuers should be aware that it will not be formed in an information vacuum. The Bank of England and the FCA will routinely exchange information on issuers to support recognition assessments. Where an FCA-regulated issuer’s scale or growth indicates a trajectory towards systemic importance, the FCA may share Part 4A application material and supervisory information with the Bank of England, subject to the usual confidentiality constraints. Non-systemic issuers should bear in mind that what they tell the FCA at authorisation may inform a future systemic-risk assessment. In addition to reviewing information shared by the FCA, the Bank of England will also engage with the issuer during the recognition process to understand its business model and risk profile and, where appropriate, to support early preparation for transition.

Transition: Recognition day is the legal pivot

Unless the Bank of England exercises its power of direction under section 191 of the Banking Act 2009 (the PoD), an issuer will become subject to the Bank of England’s full suite of systemic stablecoin rules from the day it is recognised. The PoD is the legal instrument through which any transitional arrangements are implemented. The Bank of England can use it to waive or modify specific requirements of the Code for a particular issuer during its transition. Issuers should note that the PoD can be used to disapply specific rules on a temporary basis, but also to set minimum requirements and (during any scaling stage) impose business restrictions that temporarily constrain an issuer’s growth.

The Bank of England will, if required, set a firm-specific transition timetable for each transitioning issuer upon its recognition, informed by the risk assessment made through the recognition process, and may specify the order in which certain systemic stablecoin requirements must be fully satisfied. It expects a typical transition period to last between 12 and 36 months, sequenced in two phases. The first allows up to 12 months for the issuer to apply for a settlement account at the Bank of England, complete the backing assets transition (including applicable safeguarding arrangements) and apply for direct access to a payment system. The second allows up to a further 24 months to meet the capital and reserve requirements.

Within that context, a number of workstreams require early planning as firms approach recognition, including the following:

• Direct payment system access: an issuer may need to begin to prepare its application for direct payment system access before recognition. The application can run in parallel with the recognition process (and the Bank of England expects the issuer to apply for direct access during the first part of the transition) but this could take more than 12 months. In the Joint Document’s worked example, the issuer begins applying before the recognition order is made.
• Redemption operations: the 24-hour requirement is only part of the picture. Once KYC and AML checks are complete and stablecoins are received, the issuer must instruct a valid payment order, and to do so it must have sufficient liquidity pre-positioned so that payment orders are not rejected. Customer terms, AML and KYC sequencing and liquidity policy all need to be in place to operationally support redemption requirements from the day of recognition.
• Capital, reserves and funding: the issuer will need to present a credible, forward-looking funding plan demonstrating how it will meet the Bank of England’s capital and reserve requirements over the course of its transition period. Delays in providing a sufficiently granular plan could slow the transition timeline.
• Safeguarding migration: subject to HMT providing the necessary enabling provisions, the FCA statutory trust continues after recognition, but its terms must reflect the Bank of England’s safeguarding rules, and backing assets held with overseas third parties must move to UK third parties within the same period as the backing assets transition. Trust terms, custodian contracts and intra-group arrangements may need to be adjusted accordingly, which will take time, especially if there is a transfer of assets required.

Issuers should not assume that transitional relief will be available for every systemic requirement. In the Joint Document’s worked example, the temporary issuance guardrail applies from the day of recognition. Transitioning issuers also need to be mindful that the FCA continues to supervise them throughout the transition and may engage with them regularly to confirm that transition work is not affecting compliance with its own rules. To that end, the authorities will seek to ensure that any PoD does not impair an issuer’s ability to comply with FCA rules.

Systemic at launch: A different pathway, not a shortcut

For issuers entering the Bank of England’s remit, whether transitioning from solo FCA regulation or recognised as SaL, the Bank of England will apply its existing supervisory approach to onboarding new financial market infrastructures. Under that approach, the Bank of England has discretion over whether a firm passes through one, both or neither of two stages, depending on the entity type, the maturity of the firm and its business model.

“Mobilisation”, the first discretionary stage, permits live testing under de minimis limits but does not permit activity for economic value.

“Scaling”, the second discretionary stage, permits firms to undertake in-scope activities for economic value, subject to restrictions or conditions (where needed) to manage risks to the Bank of England’s objectives.

SaL recognition should not be viewed as a shortcut for obtaining authorisation. A SaL issuer still needs the relevant Part 4A permission before issuing a UK qualifying stablecoin, and SaL recognition does not fetter the FCA’s ability to assess the application in the ordinary way, including rejecting it. The two processes are coordinated rather than merged. The FCA would liaise with HMT so that its authorisation decision is made at the same time as, or as near as possible to, any SaL recognition decision. Issuers should still build in the standard statutory clock of up to six months for a complete Part 4A authorisation application and up to 12 months where an application is deemed incomplete by the FCA. Further, an issuer that is recognised as systemic before 25 October 2027 would need to be registered with the FCA for AML purposes.

Next steps

The draft Code remains open for consultation until 22 September 2026, while the Joint Document’s transition and onboarding proposals will be consulted on until 30 September 2026. The Bank of England intends to finalise the Code by the end of the year, with consultations on supporting materials due to follow over 2027.

There are three items issuers should monitor with particular attention over the coming months. First, the FCA will consult on which of its rules it will disapply for jointly regulated issuers once the Bank of England’s Code is finalised. Second, the authorities may issue a further joint publication with additional detail on areas of overlap, the application of the Bank of England’s Code of Practice to systemic issuers and the supervisory approach to supporting issuers through transition. Third, the Bank of England expects to consult on further failure-related provisions in due course.