The Bank of England has taken a decisive step in shaping the future of digital money in the UK, launching a public consultation on November 10, 2025, for a new regulatory framework targeting sterling-denominated stablecoins deemed “systemic” to the financial system. This move aligns with the UK’s ambition to keep pace with global regulatory leaders, as the BoE plans to finalize the rules in the second half of 2026.
A Two-Tiered Regulatory Structure
The UK’s approach creates a clear distinction between different types of stablecoins based on their use and potential impact. The framework establishes a dual-regulatory model where the Financial Conduct Authority (FCA) will solo-regulate non-systemic stablecoins, particularly those used primarily for trading cryptoassets . However, if a stablecoin is widely adopted for everyday payments and recognized by HM Treasury as “systemic”, it will transition to a joint-regulatory model. In this model, the Bank of England will oversee prudential and financial stability risks, while the FCA continues to handle conduct and consumer protection. This structure is designed to ensure that the more a stablecoin behaves like mainstream money, the more its oversight resembles that of traditional banks.
Key Provisions: Limits, Backing, and Liquidity
The proposed regime introduces several key requirements aimed at ensuring stability and managing risk. A notable and debated proposal is the introduction of temporary holding limits. The BoE suggests capping individual holdings at £20,000 per token and business holdings at £10 million, with potential exemptions for larger businesses that require higher balances for operational needs. The central bank justifies these limits as a safeguard to manage the potential risk of rapid outflows from commercial bank deposits into stablecoins, which could impact the broader provision of credit in the economy.
For the stablecoins themselves, the BoE has outlined specific backing requirements. Systemic sterling stablecoins would need to be fully backed, with up to 60% of reserves allowed in short-term UK government debt and the remaining 40% held as unremunerated deposits at the Bank of England. To support new entrants, the proposal allows stablecoins deemed “systemic at launch” to initially hold up to 95% of their reserves in government debt, with the ratio scaling down to 60% as they grow. Additionally, the BoE is considering providing central bank liquidity arrangements to act as a backstop for issuers during times of stress, further reinforcing financial stability.
The Global Context and Competitive Landscape
The UK’s push for a 2026 timeline is a direct effort to match the regulatory speed of the United States and prevent a competitive disadvantage. Bank of England Deputy Governor Sir Jon Cunliffe emphasized the need to “move at comparable speed to our US counterparts to protect competitiveness and financial stability”. This positions the UK in a global race alongside the European Union, whose comprehensive Markets in Crypto-assets Regulation (MiCA) is already in force. However, the UK’s proposed holding limits are notably stricter than those in the US or EU, a point that has drawn criticism from industry groups who argue it could stifle innovation and drive activity to other jurisdictions.
The Bank of England’s consultation is a pivotal moment for the future of digital payments in the UK. By proposing a regime that grants systemic stablecoins access to central bank reserves while imposing strict safeguards, the BoE is attempting to strike a delicate balance. The goal is clear: to foster a trusted and innovative financial ecosystem without compromising the stability that underpins the wider economy. The industry now awaits the final rules, expected in late 2026, which will ultimately determine the UK’s attractiveness as a hub for the next generation of digital money.
