Bank of England Launches Stablecoin Consultation, Plans Final Rules in 2026
The United Kingdom’s central bank has opened the door to comprehensive stablecoin regulation. The Bank of England published a consultation paper on November 10, 2025, proposing a regulatory framework for sterling-denominated systemic stablecoins. This marks a pivotal moment for the integration of digital assets into mainstream finance.
The consultation seeks feedback until February 10, 2026. Following this period, the Bank of England aims to finalize regulations in the second half of 2026. This timeline positions the UK to compete with other jurisdictions developing similar frameworks.
Understanding the Bank of England Stablecoin Framework
The proposed regime targets sterling-denominated stablecoins widely used in payments and pose risks to UK financial stability. These digital currencies maintain a stable value and could operate alongside traditional payment systems for retail and wholesale transactions.
Under the proposals, the regime applies only to sterling-denominated stablecoins designated as systemic by HM Treasury. The Bank of England will oversee prudential and financial stability risks. Meanwhile, the Financial Conduct Authority will supervise conduct and consumer protection.
Non-systemic stablecoins used primarily for crypto trading, such as USDT and USDC, will remain under FCA oversight without such restrictions.
Reserve Requirements for Stablecoin Issuers Under New Rules
The central bank requires stablecoin issuers to back at least 40% of their liabilities with unremunerated deposits at the Bank of England. The remaining 60% can be held in short-term UK government debt. This structure aims to balance liquidity needs with financial stability.
Issuers that are considered systemically important could initially hold up to 95% of their backing assets in UK government debt securities as they scale. This flexibility supports early-stage viability for new entrants. The percentage would be reduced to 60% once the stablecoin reaches a scale where this is appropriate to mitigate systemic risks.
Temporary Holding Limits Address Financial Stability Concerns
The Bank of England proposed temporary holding limits of £20,000 per coin for individuals and £10 million for businesses. These caps prevent rapid outflows from traditional bank deposits into digital money. An exemptions regime allows 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. The restrictions do not apply to stablecoins used for settling wholesale financial market transactions in the Digital Securities Sandbox.
Deputy Governor Emphasizes Innovation and Trust in Digital Money
Bank of England Deputy Governor for Financial Stability Sarah Breeden stated that the proposals mark a pivotal step toward implementing the UK’s stablecoin regime. She emphasized supporting innovation while building trust in this emerging form of money.
Breeden noted that the proposals are designed for a future in which stablecoins play a significant role in payments. The framework gives industry participants the clarity needed to plan with confidence. This approach reflects lessons learned from previous consultation feedback.
Joint Regulatory Approach Ensures Comprehensive Oversight
The Bank of England and the FCA will publish a joint approach paper in 2026 to clarify how the rules work in practice. This document will guide a smooth transition between regulatory regimes. The collaboration ensures consistent standards across different aspects of stablecoin operations.
The central bank is also considering liquidity backstops for systemic issuers during periods of market stress. These facilities would offer a financial safety net if issuers struggle to sell reserve assets quickly. Such measures protect redemption operations and maintain public confidence.
Conclusion
The Bank of England’s stablecoin consultation represents a significant step toward modernizing the UK payments infrastructure. The proposed framework balances innovation with financial stability through clear reserve requirements and temporary safeguards. With finalization expected in late 2026, the UK positions itself as a competitive jurisdiction for digital asset development.
