Bank of England's 60/40 Reserve Model Rewrites Stablecoin Economics 

The Bank of England just rewired stablecoin math: systemic issuers may hold up to 60% of reserves in short‑term UK government debt, with at least 40% parked as unremunerated deposits at the Bank of England. 

To smooth the path for early movers, the consultation also proposes a temporary “step‑up” allowing newly systemic issuers to allocate up to 95% to short‑term gilts before settling at the 60% steady state. 

Why it matters: this 60/40 split tries to square payment utility with financial stability by pairing yield‑bearing sovereign paper with non‑interest central bank deposits, alongside proposed holding limits designed to mitigate liquidity stress in extreme scenarios. 

For product and strategy leaders, that means a meaningful shift in unit economics and design. The gilt allocation introduces a real revenue line tied to short‑term rates; the central bank portion and user/business limits constrain float, shape redemption mechanics, and influence bank, custodian, and merchant integration choices. 

In the pages that follow, we’ll unpack how the 60/40 model works, what it means for issuer economics and adoption, and the strategic moves that will determine who wins UK payment use cases. 

The 60/40 Reserve Rule: What It Is, Why It Changed, and What’s Next 

The Bank of England’s consultation sets a 60/40 reserve split for systemic sterling stablecoins, pairing yield-bearing short-term gilts with balances held at the central bank. The goal is to support payments utility while retaining high resilience. 

Mechanically, newly systemic issuers can allocate up to 95% to short-dated gilts during an initial “step‑up” period before moving to the steady-state mix, with the remainder held at the Bank for liquidity. The regime applies to sterling stablecoins that enter the UK perimeter once they are recognised as a Qualifying stablecoin under HM Treasury’s framework and subsequently designated as systemic by the BoE. 

Why the shift? The consultation explicitly allows issuers to receive a return on a portion of reserves so payment‑focused stablecoins can be economically viable while remaining safe. In parallel, the FCA frames its authorisation and conduct approach to strike a balance between innovation and market integrity, clarifying the joint BoE–FCA path to market. 

What’s next is a consultation-to-implementation arc: firms should expect iterated guidance on scope, reserve composition, and supervisory testing as the BoE advances this pivotal step toward a live UK regime. Issuers preparing for designation should align treasury, custody, and reporting with the reserve mix while mapping their FCA authorisation workstream. 

Bottom line: the 60/40 design creates a path that blends usable yield with safeguarded liquidity, setting clearer economics and regulatory gateposts for UK payment‑grade stablecoins. 

Key Takeaways: 

  • The BoE introduces a revenue‑enabling yet conservative reserve mix via the 60/40 reserve model. 
  • A launch “step‑up” allows up to 95% gilts before transitioning to the steady state. 
  • UK market entry requires HMT recognition as a Qualifying stablecoin, FCA authorisation that aims to strike a balance, and BoE systemic designation. 

Unit Economics Under 60/40: Yield, Float, and Capital Planning 

For the first time, UK systemic stablecoins can earn portfolio income on a defined slice of reserves: the BoE’s 60/40 reserve split pairs yield-bearing short-term gilts with a zero-yield balance at the central bank. That turns what used to be a pure cost center into a measurable revenue line while preserving high liquidity. 

A simple way to frame the revenue side is to benchmark against peers: Circle has disclosed USDC keeps about 80% Treasuries and the rest in cash, illustrating how sovereign bills become the core earnings engine when policy allows. Under the BoE model, issuers treat the gilt sleeve as their monetizable float and the central bank deposits as a carry drag, with treasury operations optimizing settlement timing, repo access, and duration within the short end. 

To make this practical, model reserves as two distinct books: a yield book (short-dated gilts) and a liquidity book (central bank deposits), then layer operating costs and capital buffers. The BoE-aligned legal analyses indicate firms should hold capital to cover the larger of a plausible loss event or operating expenses for six months, which directly affects return on equity and pricing for issuer services. On the treasury side, assume normal monetization conditions in the gilt and repo markets, which the BoE judged to have remained orderly during recent stress, but still test stressed haircuts and same-day liquidity needs. 

There is also a launch-phase boost to consider. The consultation contemplates a temporary step-up letting newly systemic issuers allocate 95% to short-dated gilts before reverting to the steady-state mix, which can materially raise gross income during the ramp. Treat that uplift as transitional cash flow to fund onboarding, compliance build-out, and partner incentives rather than a permanent margin. 

Bottom line: the 60/40 framework supports a sustainable P&L if issuers run a disciplined two-book treasury, right-size capital, and plan for a temporary yield tailwind at launch that normalizes as they reach scale. 

Key Takeaways: 

  • Revenue now depends on the gilt sleeve in the 60/40 reserve model, while central bank deposits are a carry cost. 
  • Peer disclosures like USDC’s 80% Treasuries show how sovereign paper drives earnings when permitted. 
  • Capital planning should cover operating costs for six months, with launch economics potentially boosted by a temporary 95% gilt allocation. 

Adoption and Competition: Holding Limits, Merchant UX, and the Global Landscape 

The UK’s consultation anchors adoption to hard thresholds: per‑coin wallet caps of £20,000 for individuals and £10 million for businesses. Those limits shape which payment flows are viable on day one and which use cases will wait for later phases. 

Practically, caps push stablecoins toward high‑velocity commerce, payroll disbursements, and settlement flows rather than deep corporate treasury balances. The BoE also proposes letting issuers receive a return on a portion of reserves, nudging competition to center on payments utility and reliability instead of pure balance hoarding. Together, the rules reward issuers that can convert constrained wallet headroom into frequent, low‑friction transactions. 

Merchant UX is the deciding factor. Modern checkout stacks already support on‑chain billing patterns like saved wallets and on‑chain authorization for recurring payments, which fit neatly under per‑coin caps while still driving meaningful volume. Issuers and processors that abstract gas, automate fiat sweeps, and provide instant refunds will win merchants who care more about conversion and reconciliation than the underlying rails. 

Globally, policy dispersion will influence where platforms route volume. The US has enacted the GENIUS Act, emphasizing bank‑style reserves and deposit arrangements that align with traditional payment operations; large platforms may prefer multi‑jurisdiction issuers that can present a uniform UX while meeting each market’s reserve and custody rules. For UK‑facing flows, the competitive edge will come from interoperable compliance and UX that masks the complexity of holding caps. 

Bottom line: adoption will favor issuers and processors that translate UK constraints into smooth, repeatable merchant experiences while staying competitive with global frameworks. 

Key Takeaways: 

  • UK per‑coin limits push stablecoins toward high‑velocity payments over balance storage. 
  • Merchant UX—saved wallets, automated sweeps, refunds—will determine who converts caps into volume. 
  • Global frameworks like the US GENIUS Act raise the bar, so UK issuers must pair compliance with cross‑border, platform‑friendly experiences. 

The Strategic Playbook: Treasury, Product, and Partnership Moves for UK Issuers 

The prize is now actionable: the BoE’s 60/40 reserve split lets systemic issuers earn on gilts while parking a liquidity buffer at the central bank. That mix turns reserves into a revenue engine without compromising immediate redemption capacity. 

Winning teams operationalize three lanes in parallel. Treasury builds a two‑book reserve with explicit mandates; Product turns balance‑sheet design into conversion‑boosting features; Partnerships secure the authorizations and plumbing to go live and scale. On the legal track, align your UK entity and custody model with HM Treasury’s perimeter for new regulated activities, including stablecoin issuance and related operations. 

Treasury moves: ladder the gilt sleeve strictly within eligible short‑term debt, pre‑position repo lines for intraday funding, and set a hard floor for central‑bank deposits that covers peak redemptions plus operating liquidity. Product moves: build instant settlement with auto‑sweeps to bank accounts, predictable redemption SLAs that reflect the liquidity book, and merchant‑first APIs that abstract gas, refunds, and reconciliation. Partnership moves: stand up UK‑resident custody, designate backup servicers, and contract with payment processors who can evidence compliance reporting from day one. 

Phase sequencing matters. At launch, plan your budget and incentives around the temporary 95% step‑up in gilt allocation, and pre‑agree a glide path to the steady‑state reserve mix; treat the uplift as onboarding fuel, not a permanent margin. Keep your roadmap adaptable as the consultation advances this pivotal step into binding rules. 

Do this well and your reserve policy, product UX, and regulatory posture reinforce each other, converting the 60/40 architecture into sustainable revenue and merchant‑grade reliability. 

Key Takeaways: 

  • Run treasury as a two‑book system, using eligible gilts for yield and central‑bank deposits for immediate redemptions. 
  • Turn balance‑sheet design into UX: instant settlement, auto‑sweeps, clear SLAs, and reconciliation that hides on‑chain complexity. 
  • Map your entity, custody, and processor stack to the UK perimeter so issuance and operations align with emerging regulated activities. 

Make the BoE’s 60/40 Shift Your Payroll Edge 

The BoE’s reserve model turns stablecoins from a concept into a payment-grade rail. Bitwage helps you operationalize that shift—delivering same-day stablecoin, crypto, or local-currency payouts, W-2–compliant payroll, and automated invoicing and accounting. With a 10-year, zero-breach security record and over $400M processed for 90,000+ workers at 4,500+ companies across nearly 200 countries, we translate policy clarity into reliable payroll and better team experiences. 

If you’re planning UK-facing pilots or looking to modernize global disbursements, now is the moment to move. Get ahead of onboarding queues and turn regulatory momentum into measurable savings and happier teams—Signup for Crypto Payroll today! Prefer a walkthrough? Visit bitwage.com to schedule a demo and see stablecoin payroll in action.