(5 min read)
On 10 November 2025, the Bank of England (BoE) published a consultation paper setting out its proposed regulatory framework for systemic stablecoins. Stablecoins are digital assets designed to maintain a stable value and can be used for both retail payments and wholesale settlement. Key proposals include requirements for the composition of backing assets held by systemic stablecoin issuers. Issuers will be permitted to hold up to 60% of their backing assets in short-term UK government debt, with the remaining 40% held as deposits at the BoE.
On 10 November 2025, the Bank of England published a landmark consultation paper proposing a new regulatory regime for sterling-denominated systemic stablecoins. This regime aims to balance innovation in payments with the imperative of monetary and financial stability. The consultation is accompanied by a Financial Stability Paper. While the overarching policy framework is now public, the detailed Codes of Practice are expected in 2026, following industry feedback.
Scope: Who and what is covered?
The regime targets “systemic stablecoin issuers”—payment systems or service providers recognised by HM Treasury as systemically important, meaning their failure could threaten UK financial stability. The focus is on sterling-denominated stablecoins issued by non-banks and widely used for payments or settlement. Smaller, non-systemic stablecoins (e.g. those used for crypto trading or niche applications) remain under the FCA’s solo regulation.
Crucially, the BoE is forward-looking: future use-cases such as wholesale settlement and cross-border payments are considered. Issuers should be alert to the possibility that their stablecoins may become systemic as adoption grows, triggering more stringent regulation.
Key features of the proposed regime
Backing and liquidity requirements
- At least 40% of backing assets must be held as unremunerated deposits at the BoE, ensuring immediate liquidity.
- Up to 60% may be held in short-term, sterling-denominated UK government debt, minimising asset-value risk and supporting rapid redemption.
- For issuers “systemic at launch”, a step-up regime allows up to 95% in UK government debt initially, reducing to 60% as scale is reached.
- Issuers may use repos to lend securities for liquidity, but cannot borrow securities via repos.
- The BoE is considering a back-stop lending facility for eligible, solvent systemic stablecoin issuers, providing additional liquidity assurance.
Capital and reserve requirements
- A risk-based capital model is proposed, aligned with international standards (CPMI-IOSCO Principles for Financial Market Infrastructures).
- Capital must be the greater of: (i) the cost of recovery from the largest plausible loss event; or (ii) six months’ current operating expenses.
- Issuers must hold reserves of high-quality liquid assets on statutory trust, ring-fenced for coinholders and insolvency practitioners, to cover shortfalls in backing assets and wind-down/insolvency costs.
- All assets funded by capital and reserves must be held in the UK, ensuring accessibility and oversight.
Holding limits and transitional measures
- Proposed holding limits: £20,000 per individual coinholder; £10 million per business entity. Exemptions may apply for legitimate business use.
- These limits are designed to cap systemic risk during the regime’s early stages and may be relaxed or removed as confidence in prudential controls grows.
- The Bank has stated it regards these limits are “transitional”.
Recognition of systemic importance
- The BoE will assess systemic importance holistically, considering transaction volumes, number and value of coinholders, interconnectedness with payment systems and financial market infrastructures, and substitutability of the stablecoin.
- No hard quantitative thresholds are set; each case will be assessed individually.
- It is not clear that any stablecoins would currently be regarded as systemic.
Cross-border stablecoins
- The BoE proposes that non-UK based issuers of sterling-denominated stablecoins recognised by HMT as systemic must set up a subsidiary in the UK, and that subsidiary shall hold backing assets and assets funded by capital in the UK.
- For non-sterling-denominated systemic stablecoins issued from non-UK entities, the BOE proposes the first step is to engage with the stablecoin issuer’s home authority. Following engagement, the BOE may consider includes deferring to the home authority’s regulatory and supervisory framework. This would be possible if their framework delivers broadly similar outcomes to the Bank’s regime.
Use cases: Regulatory mapping
The consultation provides a provisional mapping of regulatory treatment based on use case:
- Systemic retail payments: Stablecoins widely used by individuals (e.g. shopping, salaries) may be recommended for systemic recognition, triggering joint BoE and FCA regulation.
- Systemic corporate payments: Stablecoins used for B2B payments, treasury management, and supplier payments may also be recognised as systemic, with business holdings generally capped at £10 million (subject to exemptions).
- Settlement in core wholesale financial markets: Use of stablecoins as a means of settlement for wholesale financial market infrastructure (FMIs) is currently restricted. However, the BoE will permitted use of stablecoins in the Digital Securities Sandbox (DSS). If successful, systemic recognition and joint regulation may follow, with new regulatory limits.
- Settlement in non-core wholesale financial markets: Stablecoins used by non-FMI firms (e.g. tokenised investment funds) are not considered systemic and will be solo-regulated by the FCA.
- Settlement in Cryptoasset markets: Stablecoins used for settling unbacked cryptoasset trades are not expected to be recognised as systemic; FCA solo regulation applies.
- Non-systemic retail or corporate payments: Stablecoins not widely used for retail or corporate payments will be solo-regulated by the FCA.
Timeline and next steps
- Consultation published: 10 November 2025.
- Industry feedback period: ongoing until 10 February 2026
- Draft codes of practice: expected in 2026, setting out specific rules and compliance expectations.
Commercial implications and strategic considerations
For market participants, the regime presents both opportunities and challenges:
- Innovation: The BoE’s approach supports new payment models, but compliance costs and operational requirements will be significant for systemic issuers.
- Liquidity and capital: Firms must ensure robust liquidity and capital management, with assets held in the UK and subject to statutory trust.
- Scalability: Issuers should plan for potential transition from FCA solo regulation to joint BoE/FCA oversight as their coins become more widely adopted.
- Risk management: Holding limits and asset requirements are designed to cap systemic risk, but may constrain business models in the short term.
- Regulatory engagement: Early engagement with the BoE, FCA, and HM Treasury is essential to shape the final Codes of Practice and secure exemptions where appropriate.
Conclusion: Preparing for the future of payments
Firms should assess their stablecoin strategies, review compliance readiness, and engage proactively with regulators to ensure they are well-positioned for the new regime. The next 12-18 months will be critical as the regulatory landscape evolves.
