The Bank of England has published a consultation paper setting out its proposed regulatory framework for sterling-denominated systemic stablecoins.

These stablecoins are a new form of digital money designed to maintain a stable value and could be used for retail payments and wholesale settlement in the future.

The consultation represents a step towards preparing for a future in which new types of digital money may be used alongside existing forms, providing additional options for payments.

The proposals build on feedback received in response to the Bank’s November 2023 discussion paper and reflect its role in maintaining public trust in money as payments innovation accelerates.

The consultation sets out a framework intended to be robust, future-proof, and aligned with the National Payments Vision and the strategy of the Payments Vision Delivery Committee to modernise UK retail payments.

The Bank’s proposed regime would not cover stablecoins used as assets for non-systemic purposes, such as the buying and selling of cryptoassets, which remains the predominant use of stablecoins today.

Such stablecoins will continue to be supervised by the Financial Conduct Authority (FCA).

Key policy proposals include requirements for backing assets.

In response to feedback, systemic stablecoin issuers would be allowed to hold up to 60% of backing assets in short-term UK government debt.

For the remaining 40%, the Bank would provide issuers with unremunerated accounts at the Bank of England, supporting robust redemption and public confidence even under stress.

Issuers considered systemic at launch, or transitioning from the FCA regime, would initially be able to hold up to 95% of backing assets in short-term UK government debt to support their viability during growth.

The Bank is also considering central bank liquidity arrangements to support systemic stablecoin issuers in times of stress, providing a backstop should issuers be unable to monetise their backing assets in private markets.

The Bank is proposing temporary holding limits of £20,000 per coin for individuals and £10 million for businesses, with an exemptions regime for the largest businesses.

These limits would be removed once the transition no longer poses risks to the provision of finance to the real economy.

The limits would not apply to stablecoins used for settling wholesale financial market transactions within the Bank and FCA’s Digital Securities Sandbox.

The consultation also sets out the Bank’s approach to quantifying risks to the provision of finance arising from potentially significant and rapid outflows of bank deposits into new forms of digital money and invites feedback on alternative mechanisms to manage these risks.

Sarah Breeden, Deputy Governor for Financial Stability, said:

“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.”

Non-systemic stablecoin issuers will continue to be regulated by the FCA.

If recognised as systemic by HM Treasury, they will transition to the Bank’s regime and 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 FCA plan to publish a joint approach document in 2026 to clarify how rules will apply in practice and support a smooth transition between regimes.

The consultation remains open until 10 February 2026.

Following this, the Bank will consider responses before consulting on and finalising Codes of Practice later in 2026, which will set out detailed requirements for systemic stablecoins.

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