BoE consults on regulatory regime for sterling-denominated systemic stablecoins

The Bank of England (BoE) has published a consultation paper outlining its proposed regulatory framework for sterling-denominated systemic stablecoins. Under the framework, HM Treasury (HMT) will determine which payment systems using stablecoins, and their service providers, are recognised as systemically important. Once designated, these entities will fall within the BoE's remit and be subject to its powers under the Banking Act 2009. The proposed regime does not cover stablecoins used for non-systemic purposes which are not widely used by individuals to make retail or business payments. These activities will remain under the supervision of the UK Financial Conduct Authority (FCA).The consultation builds on feedback to the 2023 discussion paper.

Key proposals include:

• Allowing issuers to hold up to 60% of backing assets in short-term sterling-denominated UK government debt, with the remaining 40% as unremunerated deposits at the BoE. Issuers deemed systemic at launch, or transitioning from the FCA regime, may initially hold up to 95% in short-term UK government debt to support viability during growth.
• Using existing international standards as the baseline for capital requirements for general business risk of systemic stablecoin issuers, with capital to be held in the UK.
• Having central bank liquidity arrangements to support systemic stablecoin issuers during periods of stress.
• Introducing temporary holding limits of GBP20,000 per coin for individuals and GBP10 million for businesses, with an exemption regime for large corporates requiring higher holdings. The BoE expects that these limits will be removed once transition risks to real-economy financing are fully understood and mitigated or subside. Limits will not apply to stablecoins used for wholesale financial market settlement within the BoE and FCA's Digital Securities Sandbox.

The deadline for comments is February 10, 2026, with final rules expected later in 2026 in the form of Codes of Practice. The consultation is not intended to provide detailed implementation requirements at this stage.

The BoE has also published Financial Stability Paper No 53 alongside the consultation, examining key financial stability issues related to sterling-denominated systemic stablecoins and the potential digital pound, including how holding limits could mitigate these risks. The paper further sets out a methodological approach for assessing the potential impact on lending to businesses and households as the economy adapts to these new forms of money.

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