The Bank of England (BoE) has published a consultation paper outlining its proposed regulatory framework for sterling-denominated systemic stablecoins.
The move marks a major step in shaping the UK’s approach to digital money, as stablecoins are expected to play a growing role in both retail and wholesale payments alongside existing forms of currency.
The proposals are designed to ensure public confidence in new forms of digital money while maintaining financial stability. The consultation builds on feedback received following the Bank’s November 2023 discussion paper, aligning with the National Payments Vision and broader efforts to modernise the UK’s payment systems.
Under the new regime, systemic stablecoin issuers will be required to hold robust backing assets to guarantee stability and public trust. Up to 60% of these assets can be held in short-term UK government debt, while the remaining 40% will be held in unremunerated accounts at the Bank of England. This framework is intended to safeguard redemption in times of market stress and preserve confidence among users.
Issuers deemed systemic at launch or transitioning from the Financial Conduct Authority (FCA) regime will initially be permitted to hold up to 95% of their backing assets in short-term government debt to support operational resilience during early stages of adoption. The BoE is also considering introducing central bank liquidity arrangements to provide a safety net for systemic stablecoin issuers that may face liquidity pressures in volatile market conditions.
To mitigate risks to the wider financial system, the Bank is proposing temporary holding limits — £20,000 per coin for individuals and £10m for businesses. These restrictions would be lifted once the transition to new digital money no longer threatens credit availability to the real economy. Exemptions will apply to the largest corporates where higher holdings are justified, while coins used within wholesale settlement environments such as the Digital Securities Sandbox will remain exempt.
Alongside the consultation, the Bank has also released an analytical paper quantifying potential risks to credit provision arising from significant outflows of deposits into digital money. The report explores alternative mechanisms for managing these risks and invites stakeholder feedback.
Commenting on the proposals, Bank of England deputy governor for financial stability Sarah Breeden said, “Today’s proposals mark a pivotal step towards implementing the UK’s stablecoin regime next year. Our objective remains to support innovation and build trust in this emerging form of money. We’ve listened carefully to feedback and amended our proposals for achieving this, including on how stablecoin issuers interact with the Bank of England. These proposals are fit for a future where stablecoins play a meaningful role in payments, giving the industry the clarity it needs to plan with confidence.”
Under the joint regulatory framework, the FCA will oversee non-systemic stablecoin issuers, focusing on conduct and consumer protection. Should an issuer be designated as systemic by HM Treasury, oversight will transition to the BoE, with both regulators working collaboratively — the Bank focusing on prudential and financial stability supervision, and the FCA handling conduct and market integrity.
A joint approach document from the BoE and FCA is expected in 2026, providing detailed guidance on how the new rules will apply in practice and ensuring a smooth transition between the two regimes.
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