On 22 June, the Bank of England published its policy statement and draft Code of Practice for sterling-denominated systemic stablecoins. The headline change: individual and business holding caps are gone.
The Bank had proposed limiting people to £20,000 and businesses to £10m in any single systemic stablecoin. After industry pushback, it dropped that entirely and replaced it with something structurally different: a temporary £40bn issuance ceiling per stablecoin product, reviewed regularly and intended to be lifted once risks to banking credit provision ease.
That is a genuinely different regulatory philosophy, not just a more generous number. A per-person cap limits what any individual can do. A per-product issuance ceiling limits the product itself, while leaving every user free to hold as much as they like. The European Union is taking the opposite path with the digital euro, insisting on an individual cap (around €3,000) even though its own analysis suggests the practical risk from removing it is small. The UK has just shown there is a real alternative to that approach, one that protects the same policy objective (limiting disorderly deposit outflows from banks) through a different mechanism entirely.
Banking backstop
One especially noteworthy part for monetary policy-makers: the BoE confirmed it will build a central bank liquidity facility for systemic stablecoin issuers, offering short-term collateralised loans against their gilt holdings. The BoE describes this carefully as a backstop, not a front-stop: available to issuers that are fundamentally solvent, not a substitute for the 1:1 backing requirement or a fix for insolvency. Design details will follow in 2027, with access for eligible firms shortly after.
A private, non-bank issuer of digital money that holds most of its reserves in gilts and has a standing line to the BoE’s own balance sheet is acquiring something close to the defining feature of public money: a credible promise, backed by the central bank, that it remains convertible at par under stress. Call it what it functionally is: a synthetic central bank digital currency, built through a sequence of individually reasonable technical decisions rather than any single choice to create one.
That matters because banks earn lender-of-last-resort access in exchange for capital requirements, liquidity ratios, resolution regimes and continuous supervision. Systemic stablecoin issuers are being offered a version of the backstop before comparably mature discipline exists alongside it. The consultation on the draft Code of Practice, open for feedback until 22 September, is where that gap gets tested, and where issuers have every incentive to keep the backstop while resisting the obligations that historically came with it.
In the US
Worth watching is the live parallel taking place in the US. After the Genius Act in 2025 signalled a preference for privately issued money over a CBDC, the follow-on Clarity Act focuses on how much yield stablecoin issuers may pay to holders. At the time of writing, the Act had not passed the Senate. Under pressure from the banking lobby, the compromise text bars anything economically equivalent to deposit interest while permitting looser activity-based rewards.
This carve-out exists partly because Coinbase fought to keep it; the exchange earned $1.35bn in stablecoin revenue in 2025, much of it from USDC rewards, and its chief executive withdrew support for an earlier draft over this provision. Washington is drawing the public/private money line through remuneration, while London is drawing it through liquidity access. Both are – from opposite directions – deciding how close a private instrument can come to behaving like a bank deposit before bank-equivalent guardrails apply.
What rewards does the UK allow?
The rewards situation in the US has been among the most contentious parts of the stablecoin legislative process. The UK is pursuing a similar but subtly different course. Like the US, the BoE has explicitly allowed activity-based rewards. A close reading of the Bank’s phrasing on this suggests that rebates, discounts and loyalty schemes linked to stablecoin payment use are permitted, so long as they don’t arise from holding or retaining the coin. The legal test here is not what kind of reward it is, but whether it’s calculated by reference to how long you hold the coin. A cashback percentage on transactions is fine; a yield that accrues the longer your balance sits there is not, however either is labelled.
The UK is therefore using a mechanical test applied at the issuer level, whereas the US relies on a substance test – with the actual boundaries still yet to be defined by mandated US Securities and Exchange Commission/Commodity Futures Trading Commission/Treasury rulemaking.
The Bank and Financial Conduct Authority’s own joint paper includes a worked illustrative example (‘Coin Group’/ ‘Coin UK’) of a large social media and e-commerce platform building a sterling stablecoin with plans for peer-to-peer transfers, remittances, loyalty rewards and low transaction fees, integrated across its existing products. This gives a clear sense of the kind of player that the regulators are preparing themselves for. This regulatory design tilts the UK’s stablecoin market towards ‘big tech’ style platform incumbents bolting a payments layer onto an existing user base, rather than gradual, broad-based fintech-led adoption. It channels adoption towards spending, not saving, so it will work best in environments with high-frequency transactions. This can lead to real competition for card networks such as Visa and Mastercard.
The digital pound and euro
None of this means the BoE has decided to launch a digital pound through the back door; it has said clearly it has not. It means the boundary between public and private money in the UK is being redrawn through a sequence of individually defensible technical decisions, not through any single decision to redraw it. That is worth watching closely as the Code of Practice consultation closes this September and the regime moves towards its planned 2027 launch.
The EU, in particular, should be paying attention, for a reason that goes beyond simple competition. Brussels is building two things at once: a digital euro deliberately capped at roughly €3,000 per person to protect bank deposit funding, and a stablecoin regime under the Markets in Crypto-Assets Regulation that bans remuneration entirely, with no carve-out for activity-based rewards at all – leaving EU issuers in a grey zone.
It is probably no coincidence that the European Commission opened a review of MiCAR in May 2026, now running until 30 September, asking directly whether its reserve and remuneration rules are holding back euro-denominated stablecoins abroad, and admitting the EU has no equivalence framework for recognising foreign issuers at all. If that review loosens MiCAR’s rules to compete with London’s, the EU risks creating a euro-denominated private instrument with fewer restrictions on remuneration and no per-person holding cap. Even though such euro-stablecoins lack the digital euro’s legal-tender status and direct public backing, they may undermine the very sovereignty case the European Central Bank uses to justify the digital euro’s restrictive design. And if the review does not loosen those rules, well-regulated sterling stablecoins become the more attractive place to hold euro-adjacent liquidity by default, arbitrage that does not require anyone in Brussels to make a mistake, just to hold still while London moves.
Paul Helmich is an independent financial economist.
This piece draws on his working paper ‘Stablecoins as Synthetic CBDCs: Regulatory Divergence and Macro-Financial Spillovers’, published by Rosa and Roubini.
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