Bank of England Launches Consultation on Regulating Systemic Stablecoins

The Bank of England (the Bank) has today published a consultation paper (CP) setting out  its proposed regulatory regime for sterling-denominated systemic stablecoins. Such  stablecoins are a new type of digital money designed to maintain a stable value and could  be used for retail payments and wholesale settlement in the future. This marks a  significant step in preparing for a future where new forms of digital money may be  widely used for payments alongside existing ones, offering valuable choice for the public.  

The proposals build on feedback received to the November 2023 Discussion Paper and  reflect the Bank’s role in maintaining public trust in money as innovation in payments  accelerates. They set out a regime that’s robust, future-proof, and aligned with the wider National Payments Vision and the Payments Vision Delivery Committee’s  strategy to modernise UK retail payments. 

The Bank’s regime would not cover stablecoins used as assets for non-systemic purposes, such as the buying and selling of cryptoassets, which is the predominant use of  stablecoins today. Those will be supervised by the Financial Conduct Authority (FCA). 

Key policy proposals covered in the consultation paper include: 

Backing Assets: In response to feedback, systemic stablecoin issuers will be permitted  to hold up to 60% of backing assets in short-term UK government debt. For the remaining  40%, the Bank will, as previously proposed, provide issuers unremunerated accounts at  the Bank of England, ensuring robust redemption and public confidence, even under  stress 

Additionally, those issuers considered systemic at launch, or transitioning from the FCA  regime, will initially be able to hold up to 95% of backing assets in short-term UK  government debt, to support their viability as they grow.

All releases are available online at www.bankofengland.co.uk/news/news.

In a new proposal, The Bank of England are also considering central bank liquidity arrangements to support  systemic stablecoin issuers in times of stress. These arrangements would reinforce  financial stability by providing a backstop should systemic issuers be unable to monetise  their backing assets in private markets.  

Holding Limits: To safeguard continued access to credit as the financial system gradually adapts to new forms of digital money, the Bank is proposing temporary holding  limits of £20,000 per coin for individuals and £10 million for businesses (with  an exemptions regime to allow the largest businesses to hold more if required). These  limits would be removed once the transition no longer poses risks to the provision of  finance to the real economy. These limits would not apply to stablecoins used for settling wholesale financial market transactions in the Bank and FCA’s Digital Securities Sandbox. 

Additionally, the Bank is today publishing an approach to quantifying the risks to the  provision of finance to the economy from potentially significant and rapid outflows of bank  deposits into new forms of digital money. This analysis has shaped the proposed holding  limits, and the consultation paper also invites feedback on alternative mechanisms for  managing these risks. 

Sarah Breeden, Deputy Governor for Financial Stability, 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.” 

Joint Regulation with the FCA 

Non systemic stablecoin issuers will be regulated by the FCA. If recognised as systemic by HM Treasury (HMT), they will transition into the Bank’s regime and will be jointly regulated,  with the Bank overseeing prudential and financial stability risks, and the FCA continuing to  supervise conduct and consumer protection.  

The Bank and the FCA will publish a joint approach document in 2026 to clarify how rules  will apply in practice and support a smooth transition between regimes. 

Next Steps The consultation is open until 10 February 2026. Following this, the Bank will  consider feedback before consulting on and then finalising Codes of Practice later in  2026. These will set out the detailed requirements for systemic stablecoins.