The Bank of England has launched a consultation outlining its proposed regulatory framework for sterling-denominated systemic stablecoins.
The move marks a major milestone in shaping the UK’s approach to digital money, setting the stage for stablecoins to function alongside traditional payment systems in both retail and wholesale markets.
Stablecoins—digital tokens designed to maintain a stable value—are expected to play a growing role in everyday transactions and financial settlements. The Bank’s new consultation paper builds upon its November 2023 Discussion Paper, aiming to strengthen public trust in digital money while ensuring stability as innovation accelerates across the payments landscape. The proposals align with the UK’s broader National Payments Vision and the strategy of the Payments Vision Delivery Committee to modernise retail payments.
Crucially, the proposed regime would focus only on stablecoins used for payments at scale—those deemed “systemic”—while leaving non-systemic stablecoins, typically used for cryptoasset trading, under the Financial Conduct Authority’s (FCA) supervision.
Among the key policy measures, the Bank has proposed that systemic stablecoin issuers will be allowed to hold up to 60% of their reserve assets in short-term UK government debt, with the remainder placed in unremunerated accounts at the Bank of England. This balance is designed to ensure strong backing, robust redemption mechanisms, and public confidence even in stressed conditions.
For issuers classified as systemic at launch or transitioning from the FCA’s framework, an initial allowance to hold up to 95% of their assets in government debt has been proposed to support financial resilience during early stages of operation. The Bank is also exploring the creation of central bank liquidity facilities to provide additional stability during times of market stress, reinforcing its commitment to financial stability.
To mitigate risks to credit provision during the transition to new digital forms of money, the Bank is proposing temporary holding limits of £20,000 per coin for individuals and £10m for businesses. These caps aim to prevent large outflows of deposits from the traditional banking system. Exemptions may apply for larger corporates, and the limits will eventually be removed once systemic risks have diminished.
Alongside the consultation, the Bank has released an analytical approach for assessing potential risks to credit markets from significant movements of deposits into stablecoins. This analysis has informed the proposed limits and invites feedback on possible alternative safeguards.
Commenting on the announcement, 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 plans, non-systemic stablecoin issuers will remain under FCA oversight, while those designated as systemic by HM Treasury will transition into the Bank’s regime, resulting in joint regulation between the two authorities. The Bank will focus on prudential and financial stability oversight, while the FCA will retain responsibility for conduct and consumer protection.
To ensure coordination and regulatory clarity, the Bank and the FCA will publish a joint approach document in 2026, outlining how both regimes will interact in practice and ensuring a smooth transition for stablecoin issuers as the new framework takes effect.
Keep up with all the latest RegTech news here
Copyright © 2025 RegTech Analyst
Copyright © 2018 RegTech Analyst
