Bank of England consults on UK regime for systemic stablecoins

The Bank of England has launched a consultation on a regulatory regime for systemic stablecoins in the UK. The proposed regime would apply to system operators and service providers recognised by the UK Treasury as of systemic importance in the UK. It would serve as an overlay to the general framework proposed by the Financial Conduct Authority. Stakeholders have three months to comment on the proposals, with the new framework set to be finalised in 2026. 

The proposed framework for systemic stablecoins

In its Consultation Paper, the Bank lays out its policy proposals for systemic stablecoins, leaving consultation on detailed rules for the first half of 2026. The proposed regime focuses on stablecoins that could be used widely in real world payments and settlements and not just for settlements within the cryptoasset ecosystem. 

The proposals build on the Bank’s 2023 Discussion Paper, making some notable concessions and clarifications to help address concerns raised by the industry. 

Key policy proposals and points of interest include: 

Changes to backing assets proposals…

Respondents to the 2023 DP raised strong concerns that the Bank’s proposal for issuers to hold all backing assets in unremunerated central bank deposits would be incompatible with many stablecoin business models (under which issuers rely on revenue streams from backing assets). 

The new proposal is for 40% of backing assets to be held in such central bank deposits, with the remaining 60% of backing assets to be held in short-term sterling-denominated UK government debt securities. The Bank acknowledges that, even with this concession, issuers may not be able to rely on backing assets alone for a viable business model and encourages in scope entities to consider other ways of generating revenue from payment services.

The Bank has also taken on board feedback that transitioning between the FCA and Bank of England regimes could be challenging for issuers, not least due to fundamental differences in backing requirements. It proposes a ‘step-up’ regime, with scaling issuers being allowed to hold up to 95% of their backing assets in UK government securities as they transition to systemic status. 

…and shortfall reserve requirements

Alongside changes to the backing asset proposals, the Bank has also revised its proposals for capital and reserve requirements. 

Among other things, the Bank has adjusted its shortfall reserve requirements to require issuers to hold reserves in respect of the financial risk associated with backing assets that are not central bank deposits. 

At the same time, it has dropped the previously proposed reserve requirements in respect of operational risk, acknowledging that this overlapped with the capital requirements for general business risk. The Bank proposes that all shortfall reserve assets would be held under a statutory trust in the UK (in the same way it proposes for backing assets). Issuers would be entitled to retain any income or gains on the reserve assets.

Holding limits remain but are clarified

The Bank is now proposing setting holding limits of £20,000 on a per-coin basis for individuals and £10 million for businesses. 

Looking ahead, the Bank recognises that the £10 million limit could be too low for some businesses. It proposes to introduce an exemption regime to provide some flexibility. Notably, the Bank also sees these holding limits as a transitional measure to manage the short-term risks of bank disintermediation, and contemplates that these limitations may be loosened and removed in the future as potential risks posed by systemic stablecoins are “suitably understood and mitigated”.

Prohibition on interest remains

The Bank reaffirms its position that issuers would be prohibited from offering interest to holders. At the same time, it leaves the door open to permitting third parties to offer rewards.

Legal claim and redemption requirements remain with helpful clarifications

The Bank retains its position that holders should have a robust legal claim against the issuer and be able to withdraw funds on demand at face value without undue constraint or cost. 

The Bank expects redemption requests to be processed by the end of the day on which a valid redemption request is made, and in real time wherever possible. It concedes that issuers should be allowed to charge fees, provided that such fees reflect the cost of providing the redemption service. The issuer cannot, for example, pass on costs or losses arising from the sale of assets in the backing asset pool. These proposals are broadly similar to the FCA’s proposals.

The Bank also now contemplates providing the issuers it supervises with various tools to support redemptions. Notably, it envisages that such issuers would have direct access to the Bank’s payment systems and access to its credit facilities, to help meet liquidity needs. It also contemplates that issuers will be able to lend securities via repurchase agreements in order to generate liquidity (but not to borrow securities).

Nuanced approach to overseas issuances 

The Bank’s regime would only apply to system operators and service providers recognised by the UK Treasury as being of systemic importance to the UK financial system or interests in the UK. That said, the Bank envisages that overseas issuers could potentially be brought within scope, particularly if they are issuing sterling-denominated stablecoins. Where overseas issuers are recognised by the Treasury, they would be required to set up a UK subsidiary and hold backing assets in the UK. 

In relation to non-sterling stablecoins issued by non-UK entities, the Bank envisages that it will engage first with the stablecoin issuer’s home authority and consider whether it could defer to the home authority’s regulatory and supervisory approach. This follows recent comments from Sarah Breeden, the Deputy Governor of the Bank, that the UK has been coordinating with US authorities on this topic.

Use of stablecoins in wholesale financial markets to be explored under Digital Securities Sandbox 

The Bank takes the view that stablecoins are not currently able to meet the cash settlement requirements applicable in relation to securities settled through central securities depositories. While it does not want to see a significant shift away from ultimate settlement in central bank money, it is open to exploring the use of stablecoins in wholesale settlement as an alternative to commercial bank money, and plans to explore this through the Digital Securities Sandbox. The Bank contemplates that stablecoins used for such purposes would need to be supervised by the Bank under the proposed regime.

Prohibition on banks issuing stablecoins also remains

There is no departure from the policy position previously articulated by the Prudential Regulation Authority in a 2023 Dear CEO Letter. In short, this restricted banks from issuing stablecoins to retail users, unless done through a separate insolvency-remote entity with distinct branding.

Approach to public blockchains

The Bank is still grappling with whether stablecoins based on public blockchains could meet its requirements. It says that it is open to the use of public permissionless ledgers by systemic stablecoin issuers, provided that they can meet its expectations and ensure confidence and trust in money. 

At the same time, it highlights areas where this may be challenging, particularly around accountability, settlement finality and operational resilience. It plans to continue engaging with the industry to understand solutions and mitigants to these risks. It is also considering amendments to the Settlement Finality Regulations to address potential gaps in legal settlement finality.

Next steps

The Bank welcomes responses to the proposals by 10 February 2026. It plans to publish the policy statement with responses to the feedback received during the first half of next year and consult on detailed rules before publishing final rules in the second half of 2026.