UK Outlines a New Regulatory Era for Stablecoins
The Bank of England has released its long-anticipated consultation framework for regulating sterling-based stablecoins, signaling a pivotal shift in how digital payment assets will operate within the UK financial system. The proposal targets “systemic stablecoins” - tokens expected to be widely used for everyday retail payments, business settlements, and cross-border transfers. The central bank said this shift is essential to protect financial stability, ensure liquidity safeguards, and create clarity for regulated payment providers.
The BoE confirmed the consultation period will remain open until Feb. 10, 2026, with final rules planned for the second half of that year. The move positions the UK to advance stablecoin oversight at the same pace as the United States, reinforcing a transatlantic regulatory alignment that has become a core strategic priority for London.
Strict Holding Limits: £20,000 Per Person
One of the most notable features of the proposal is a holding limit of £20,000 ($26,300) per individual for each regulated stablecoin. For businesses, the cap is set at £10 million, although exemptions may be granted for firms that require higher balances to operate normally.
The BoE emphasized that these caps are designed to prevent rapid capital flight from traditional banking deposits into digital money, especially during periods of financial stress. The regulator highlighted that stablecoins could impact banking liquidity, especially given the UK’s heavily bank-dependent mortgage and lending markets.
Backing Reserves and Liquidity Requirements
To ensure systemic stablecoins are fully redeemable on demand, the BoE is proposing strict backing rules. Issuers must hold at least 40% of liabilities in unremunerated deposits at the BoE, while up to 60% may be backed by short-term UK government securities.
As systemic stablecoins scale, issuers may temporarily hold up to 95% of reserve assets in government debt, but this ratio would gradually reduce to 60% to balance financial safety and operational flexibility.
The goal is to anchor stablecoin value to high-quality collateral, protecting consumers and stabilizing payment flows.
Which Stablecoins Will Be Regulated?
The framework applies specifically to GBP-pegged stablecoins that reach systemic payment usage. His Majesty’s Treasury will hold the authority to designate which tokens are systemic, placing them under direct Bank of England supervision.
The BoE clarified that non-sterling stablecoins like USDT and USDC are not covered under this initial regime:
This distinction signals that international stablecoins may face separate treatment, depending on market penetration inside the UK.
Ongoing Concerns: Self-Custody and Public Blockchains
The BoE also expressed unease around self-custodial wallets, warning they may complicate enforcement and emergency payouts in cases of issuer failure. Similarly, the Bank reaffirmed skepticism toward public, permissionless blockchains, stating:
The regulator said it will continue monitoring wallet structures, settlement risks, and the practice of paying interest on stablecoin balances, which it views as potentially destabilizing if used at scale.
