Quick Takeaways
- The Bank of England proposed a regulatory framework for systemic GBP stablecoins with reserve and holding rules.
- Non-systemic stablecoins like USDT and USDC remain under FCA oversight without restrictions.
- Temporary holding limits aim to prevent disruption to UK banking deposits.
Bank of England Opens Consultation on Stablecoin Rules
The Bank of England (BoE) has opened a public consultation on new regulations for sterling-backed “systemic” stablecoins. The move signals the UK’s effort to modernize payments while safeguarding financial stability and consumer trust.
Released on Monday, the consultation outlines how large-scale stablecoins could integrate into Britain’s payment systems. It builds on feedback from the BoE’s 2023 discussion paper and aligns with the government’s broader digital money strategy.
Who the Rules Apply To
The regime targets only sterling-backed stablecoins deemed systemic by HM Treasury. The Bank of England will oversee stability risks, while the FCA manages consumer protection.
Non-sterling or crypto-focalise stablecoins like USDT and USDC will ride out under FCA inadvertence without these new restrictions.
According to the BoE, the framework aims to be “robust and future-proof,” ensuring digital money complements existing financial systems rather than undermining them.
Backing Rules and Reserve Structure
A key part of the proposal defines how systemic stablecoins must be backed. Issuers could hold up to 60% of reserves in short-term UK government debt, with the remaining 40% kept in unremunerated accounts at the Bank of England.
The BoE said this mix will support redemption demands and maintain public confidence.
Issuers transitioning from the FCA regime or launching as systemic could initially hold up to 95% in government debt to help ensure early viability. The BoE also hinted at liquidity backstops to support issuers during market stress.
Temporary Holding Limits to Manage Risk
To avoid destabilizing bank deposits, the BoE proposed temporary caps on holdings of £20,000 ($26,350) per individual and £10 million ($13.2 million) per business.
These limits could be relaxed once risks to credit markets subside. They also won’t apply to stablecoins used for wholesale settlement within the Digital Securities Sandbox, co-run by the BoE and FCA.
A Step Toward the UK’s Digital Money Future
Sarah Breeden, Deputy Governor for Financial Stability, said the proposals mark “a pivotal step” toward the UK’s stablecoin framework expected next year.
“Our objective remains to support innovation and build trust in this emerging form of money,” Breeden said. The audience ladder until February 10, 2026. A joint overture newspaper from the BoE and FCA will follow after next class, clarifying how the rules will be practiced in practice and ensuring a smooth transition for stablecoin issuers.