Key Insights
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The Bank of England has launched a consultation on regulating sterling-denominated “systemic” stablecoins and potentially introducing a digital pound.
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Proposed rules include strict backing requirements, temporary holding limits, and oversight shared between the Bank and the FCA.
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The consultation runs until February 10, 2026, with a joint BoE-FCA framework expected later next year.
LONDON, (MarketsXplora) — The Bank of England has launched a public consultation on its proposed regulatory framework for sterling-denominated “systemic” stablecoins — a move that could shape how digital money functions in Britain’s payment system and lay groundwork for a potential digital pound.
Published on Monday, the consultation paper outlines how stablecoins could operate alongside existing retail and wholesale payment systems. It builds on a 2023 discussion paper and earlier feedback, reflecting the central bank’s aim to modernize payments without compromising public trust in money.
Under the proposed regime, only stablecoins denominated in sterling and designated as systemic by His Majesty’s Treasury would fall within the Bank of England’s remit. The central bank would oversee prudential and financial stability risks, while the Financial Conduct Authority (FCA) would handle conduct and consumer protection issues. Non-sterling stablecoins or those primarily used for crypto trading — such as USDT or USDC — would remain under the FCA’s supervision.
Backing Rules and Temporary Limits
A central feature of the proposal is how issuers must back their tokens. The Bank of England said systemic stablecoin issuers would be required to hold 60% of their reserves in short-term UK government debt and 40% in unremunerated deposits at the Bank itself — a structure intended to ensure redemption capacity and bolster public confidence.
Issuers considered systemic at launch, or transitioning from the FCA’s existing regime, could initially hold up to 95% of their backing assets in government debt to support early viability. Over time, this ratio would fall to 60%. The Bank is also considering liquidity facilities to serve as a backstop during market stress.
To prevent destabilizing outflows from traditional bank deposits into digital money, the central bank has proposed temporary caps on stablecoin holdings: £20,000 ($26,350) for individuals and £10 million ($13.2 million) for businesses. Larger firms may be exempted if higher balances are necessary for operations. These limits would be lifted once the transition no longer threatens credit provision, the Bank said.
The holding caps would not apply to stablecoins used for wholesale settlements within the Digital Securities Sandbox — a joint initiative of the Bank of England and the FCA.
Related: UK’s FCA Unveils Proposals for Stablecoin Issuance and Crypto Custody Rules
Clarity and Confidence for Industry
“Today’s proposals mark a pivotal step towards implementing the UK’s stablecoin regime next year,” said Sarah Breeden, the Bank’s Deputy Governor for Financial Stability.
“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.”
The Bank said the framework is intended to be “robust and future-proof,” aligning with wider efforts to modernize UK retail payments. His Majesty’s Treasury will decide which stablecoin systems qualify as systemic, triggering the Bank’s oversight.
The consultation runs until Feb. 10, 2026, after which the Bank of England and the FCA will issue a joint paper setting out their coordinated approach and a roadmap for a smooth transition into the new regulatory regime.