BoE’s 60/40 Reserve Model Rewrites Stablecoin Economics

The Bank of England has reset the rules for payment stablecoins, proposing a 60/40 reserve split between short‑term government debt and central‑bank deposits. If adopted, stablecoins could appear in everyday UK checkouts as early as 2025.

That marks a clear pivot from the earlier plan to park all reserves at the BoE, a model many warned would be uneconomic for issuers.

The broader goal is simple: if stablecoins are to be used widely for payments, they must meet same standards as other forms of money. That framing aligns safety, par redemption and operational resilience with the UK’s ambition to channel innovation into systemic‑grade payment rails.

For issuers, the 60/40 mix resets the economics by enabling yield on a portion of reserves while maintaining a substantial liquidity buffer at the Bank of England. For merchants and platforms, a more sustainable model could unlock integrations that prioritize lower costs, faster settlement and compliance‑ready user experiences.

This article explains what changed, why the economics now look different, and how issuers and platforms can position for UK‑grade stablecoin payments.

The BoE’s 60/40 Reserve Model and Scope

The Bank of England’s proposal lets issuers hold up to 60% of reserves in short‑term UK government debt while keeping 40% as deposits at the central bank—replacing an earlier vision of 100% central‑bank deposits that industry warned would cripple economics.

The pivot isn’t cosmetic; it defines who is in scope and how UK oversight will work. HM Treasury has committed to bring fiat‑backed stablecoins into regulation for use in UK payment chains, with the Bank of England overseeing systemic payment systems and the FCA supervising issuers and custody providers.

At the issuer level, the FCA’s regime for payment use focuses on fiat‑backed tokens: it sets expectations for 1:1 backing, value stability and redeemability at par in fiat—paired with oversight of authorization, disclosure, and custody. In short, the FCA would regulate issuance and custody while the BoE’s prudential lens applies when stablecoins sit at the heart of systemic payment systems.

Why the 60/40 split? It reflects feedback that mandating all reserves at the central bank would leave no sustainable yield to fund operations. The new mix preserves a large safety buffer at the BoE while allowing a measured amount of gilt exposure to restore economic viability—without loosening the payments‑grade bar on backing and redemption.

Bottom line: the UK has moved from a theoretically safe but uneconomic model to a pragmatic, payments‑ready framework that clarifies who is covered and how money flows will be supervised.

Key Takeaways:

The reserve blueprint shifts from all BoE deposits to a mixed model, pairing central‑bank liquidity with short‑dated gilts to unlock viable issuer economics.
Scope is two‑tiered: BoE oversight for systemic payment systems; FCA authorization and conduct rules for issuers and custody of fiat‑backed coins used in UK payment chains.
Par‑redeemability, high‑quality reserves, and custody safeguards remain non‑negotiable, setting a clear bar for UK‑grade payment stablecoins.

Yield, Float, and Redemption Under the New Rules

Issuers suddenly have room to earn a spread: the BoE’s proposal allows a 60/40 reserve split between very short‑dated gilts and central‑bank deposits, turning inert float into a modest yield engine.

That’s a stark pivot from the BoE’s earlier stance that reserves should be held as central‑bank deposits with effectively no interest—a design that left little to fund operations, let alone invest in compliance and customer experience.

Practically, the gilt sleeve can be managed like a money‑market portfolio—short duration to minimize mark‑to‑market risk—while the central‑bank portion acts as an immediate‑liquidity backstop. Redemption discipline tightens this further: the FCA proposes par convertibility in fiat with a maximum T+1 redemption for retail holders, which forces treasuries to keep duration tight and liquidity high. That aligns with the FSB’s call for reserves to be high quality and liquid so they can be sold quickly with minimal price impact.

Not all float is investable anyway. UK safeguarding and wind‑down rules require customer funds to sit in segregated accounts and be returnable promptly if a firm fails, which implies intraday buffers, daily reconciliations, and conservative treasury policies that prioritize access over carry.

Net result: the 60/40 design restores sustainable economics without relaxing par redemption or resilience—supporting a business model that can absorb compliance costs while keeping user conversion and withdrawals friction‑light.

Key Takeaways:

The BoE’s 60/40 structure unlocks yield on a portion of reserves while preserving a large central‑bank liquidity buffer.
FCA rules (par convertibility and T+1 processing) compress duration and keep reserve quality high, limiting yield‑chasing.
Safeguarding and wind‑down obligations mean part of the float must stay instantly accessible, further anchoring conservative treasury management.

Strategic Playbook for Issuers

In 2023, Visa expanded stablecoin settlement to Solana and major acquirers, signaling that enterprise-grade checkout and settlement rails are ready once UK authorization lands. That’s your cue to plan a UK-grade launch that satisfies regulators while winning distribution with PSPs and platforms.

Build to “equivalence” from day one. The Bank of England’s objective is that stablecoins used in payment systems meet outcomes “equivalent to commercial bank money,” including redemption discipline, reserve quality, governance and operational resilience—treat this as your backbone for product, treasury and SLAs, not a box-tick hurdle. Anchor your roadmap to the BoE/FCA split: systemic payment-system standards and issuer-level conduct will shape who you authorize, how you custody, and what you promise on redemption—so design your model to demonstrate those equivalent standards through live data, not just policies.

Translate policy into execution with three tracks. For market entry, pre-clear your entity perimeter (issuer vs wallet vs service provider), lock a PSP/acquirer distribution plan, and sequence go-live from controlled pilots to scaled acceptance. For reserves, mirror best-practice fiat-backed models: hold cash plus very short-duration sovereigns; as a benchmark, USDC reserves sit in cash and short-duration Treasuries—apply the same discipline with gilts and central-bank deposits, with intraday buffers sized to your redemption SLA. For pricing, decide how yield supports your P&L: will you pass some carry to users (e.g., fee rebates) or use it to compress merchant and withdrawal fees? Price to win platform distribution while funding compliance, audits, and 24/7 liquidity ops.

Two advanced considerations can de-risk scale. First, stress your redemption stack and treasury playbook against FMI-like scenarios; prudential bodies have long warned that many tokens are not a safe store without high-quality, liquid reserves—so keep duration tight and liquidation pathways pre-arranged. Second, partner early with acquirers and PSPs already piloting stablecoin flows; the same teams that turned on Visa’s stablecoin settlement can accelerate your merchant onboarding once you’re authorized.

Executed well, this playbook gets you authorized, liquid, and distribution-ready—so you can convert regulatory clarity into real payment volume at sustainable unit economics.

Key Takeaways:

Treat BoE’s “equivalence to commercial bank money” as your design spec: governance, redemption SLAs, and reserve quality must be provable in production.
Run a two-pocket treasury: cash/central-bank deposits for immediacy plus short-duration sovereigns for carry, benchmarking against transparent models like USDC reserves.
Win distribution by aligning with acquirers/PSPs already piloting stablecoin flows and use yield to sharpen pricing while funding compliance and 24/7 liquidity.

Adoption Timeline and Triggers: Merchants, Platforms, and Payroll Rails

Checkout plumbing is already switching on. Stripe announced support for USDC payments across three networks, creating an instant bridge from wallets to mainstream ecommerce.

What actually unlocks scale in the UK is regulatory equivalence and authorization. The Bank of England’s objective is that payment stablecoins meet standards equivalent to commercial bank money, and HM Treasury has set the path to bring fiat‑backed stablecoin activity into the FCA’s regulatory perimeter. Read that as a sequencing cue: issuers/wallets get authorized, payment systems meet prudential bars, then PSPs flip stablecoin acceptance and settlement on for merchants.

For execution, start where the demand already lives—platform payouts and marketplace checkouts that benefit from faster settlement and lower cross‑border friction. With Stripe and major acquirers building stablecoin rails, issuers should co‑design pilots that keep flows Travel Rule‑compliant from day one and map cleanly to existing refunds, disputes, and reconciliation workflows. Payroll follows once compliance is fully wired: UK crypto wages must be taxed under PAYE, since such payments count as earnings with Income Tax and National Insurance due at the sterling value at payment time.

Two compliance switches determine when platforms can scale. The UK’s Cryptoasset Transfer Rule has applied since 1 September 2023, so merchants and payroll providers need counterparties that can collect, verify and share originator/beneficiary data. Pair that with issuer authorization under the FCA regime and the BoE’s systemic oversight, and large PSPs can move from proofs‑of‑concept to production acceptance.

Net-net: once authorization lands and Travel Rule workflows are embedded, merchant checkouts and payroll rails can expand quickly via PSPs already shipping stablecoin capabilities.

Key Takeaways:

PSP readiness is real: Stripe’s USDC support and acquirer integrations mean merchants can adopt quickly once UK authorization is in place.
Regulatory sequencing gates the timeline: BoE/FCA authorization first, then PSP integrations, followed by scaled merchant and payroll programs.
Compliance flips adoption on: Travel Rule workflows and PAYE treatment for crypto wages must be operational before platforms and employers go live.

Turn the BoE’s 60/40 Shift into Your Payroll Advantage

As the UK readies payments-grade stablecoin rails, now is the moment to translate regulatory clarity into real operational wins. Bitwage helps you do just that—delivering same-day payouts in cryptocurrency, stablecoins, or local currency; W-2–compliant payroll; crypto-funded payroll with fiat or crypto outputs; and end-to-end workflows for invoices, expenses, and automated accounting. With over $400M processed for 90,000+ workers at 4,500+ companies across nearly 200 countries—and a spotless, 10-year zero-breach security record—Bitwage gives you the resilience, speed, and control to run modern payroll at global scale.

Get ahead of your 2025 planning window and be ready the day PSPs flip stablecoin acceptance on. Streamline cross-border payouts, reduce fees, and delight your distributed teams with faster settlement and compliance-ready reporting. Ready to move from strategy to execution? Sign up for Crypto Payroll today: https://bitwage.com