Background of the Draft
The Bank of England (BoE) has unveiled a draft policy statement and code of practice targeting systemic stablecoin issuers. The document is designed to support safe innovation and to help sterling-denominated stablecoins evolve into trustworthy digital currencies. It outlines key regulatory provisions including an issuance cap, interest ban, reserve composition, and redemption timelines.
Key Regulatory Provisions
Under the draft, the total issuance of systemic stablecoins is initially capped at £40 billion. This ceiling is intended to contain systemic risk. The draft explicitly prohibits issuers from paying interest to holders, thereby distinguishing stablecoins from deposit products and avoiding competition with bank deposits. On reserve assets, issuers must hold 70% in short-term UK gilts and 30% in deposits at the Bank of England, ensuring a high level of safety and liquidity. Additionally, the draft mandates that redemption requests must be fulfilled within 24 hours, granting holders timely access to fiat currency.
This regulatory step marks a significant milestone in the United Kingdom's approach to digital asset oversight. The BoE balances the goal of encouraging financial innovation with the need to maintain financial stability. The draft will now enter a public consultation period, and the final regulatory framework is expected to be shaped by feedback from market participants and other stakeholders.