The Financial Conduct Authority published its final stablecoin policy on 30 June 2026, making it illegal for issuers to pass interest or any income from reserve assets directly or indirectly to tokenholders. The ban covers everything from explicit yield to loyalty multipliers and cashback funded by reserve income. The regulator’s reasoning: stablecoins are payment instruments, not investment products, and offering yield creates run risks and maturity mismatches.
Why the interest ban
The FCA classifies stablecoins as a means of payment, so passing returns to holders would blur the line between a payment token and a savings product. The regulator argues that yield on stablecoins could trigger bank-like runs if holders rush to redeem during stress. Reserve income must stay with the issuer, used only for safety buffers, operations, audits, and compliance. The ban applies to both direct payments and indirect structures — for example, a platform cannot offer cashback that is funded by the interest earned on the issuer’s reserve.
Reserve composition and issuer safeguards
Under the final rules, up to 70% of a stablecoin’s backing assets can be short-term UK government debt. The remainder must sit in unremunerated central bank deposits. A temporary cap on issuance — set initially at £40 billion per coin — is tied to Bank of England oversight. The FCA also set a minimum own funds requirement of £350,000 and reduced the K-SII calibration to 1% in the final package. These buffers are meant to absorb losses without tapping reserve income that would otherwise go to holders.
Tax treatment from April 2027
HMRC will treat interest-like returns on eligible stablecoins as savings income starting in April 2027. The change is expected to affect roughly 1.2 million individuals who hold or earn returns on these tokens. The tax treatment applies only to returns that resemble interest — the ban on issuer-paid yield means most stablecoin holders won’t see such income from the token itself, but third-party platforms may still generate returns through lending or rehypothecation.
What platforms can still do
The FCA’s ban targets issuers, not third-party platforms. Those platforms may still offer returns to users by borrowing stablecoins or rehypothecating them — activities separate from the issuer’s reserve management. That means a user could earn yield on a stablecoin through a lending protocol or a centralized exchange, as long as the issuer itself is not passing along reserve income. The distinction leaves room for yield-bearing products, but the stablecoin’s design must remain payment-focused.
The rules take effect immediately. Issuers must meet the £350,000 own funds requirement and the 1% K-SII calibration. The £40 billion per-coin guardrail will be reviewed by the Bank of England. The tax change arrives in April 2027, giving platforms and holders time to adjust. Whether the interest ban reshapes the stablecoin market or simply pushes yield activity to third parties remains an open question — one the FCA will have to watch closely.
