The Bank of England (BoE) published a consultation on 10 November 2025 setting out its proposed regulatory regime for sterling denominated systemic stablecoins. It builds on the BoE’s 2023 discussion paper and is accompanied by analysis on the role of holding limits.
The paper outlines how the BoE, HMT and the FCA plan to regulate systemic issuers, manage transition risks and maintain confidence in digital money. It sets out proposals on backing, capital, redemption and holding limits and is a key step toward the UK’s stablecoin regime planned for 2026.
Non-sterling stablecoins which reach systemic scale in the UK will be considered in a later phase. The BoE may choose to defer to the issuer’s home authority if its regime delivers comparable outcomes or apply the same standards as the UK framework where equivalence cannot be established.
In this article
What does this mean?
The BoE sets out how sterling denominated systemic stablecoins would be regulated under FSMA 2023. A coin may be considered systemic if its disruption or failure could threaten UK financial stability, confidence in money or have serious economic consequences due to its scale, usage or interconnectedness. HMT will determine which issuers, payment systems or service providers meet this threshold, based on factors such as transaction volumes, substitutability and linkages with financial market infrastructure. Once recognised, they will come under joint BoE and FCA oversight.
Systemic issuers will be subject to the BoE’s powers under the Banking Act 2009, including directions, rules and codes of practice. Non-systemic stablecoins will remain FCA regulated. The BoE regime will apply only after HMT formally recognises an issuer as systemic. Firms are likely to begin under FCA supervision and transition into the BoE’s remit once their scale or interconnectedness meets the systemic threshold.
Backing assets
The BoE proposes that systemic stablecoin issuers hold at least 40% of backing assets as unremunerated deposits at the BoE and up to 60% in short-term UK government debt. A step-up regime would allow those recognised by HMT as systemic at launch to hold up to 95% in government debt, reducing to 60% as they scale. Temporary deviations from the 40:60 ratio would be permitted to meet large unanticipated redemption requests. Issuers may lend, but not borrow, securities through repurchase agreements to generate liquidity. The BoE is considering a backstop lending facility for solvent and viable issuers.
Capital and reserves
The BoE plans to align capital requirements with international standards, requiring capital equal to the higher of six months of operating expenses or the cost of recovery from the largest plausible loss event. Assets funded by capital must be high quality and liquid. Issuers must also hold reserves of liquid assets on statutory trust in the UK to cover market risk, insolvency and wind down costs. The operational risk buffer proposed in 2023 has been removed, with such risks expected to be met through general business capital.
Holding limits
The BoE proposes temporary per coin limits of £20,000 for individuals and £10m for businesses, with exemptions for firms that require higher balances for operational purposes. The proposed limits are intended to reduce the risk of rapid and large-scale deposit outflows from banks as the economy adjusts to stablecoins.
The BoE’s analysis shows that without limits, widespread movement of deposits into digital money could reduce credit availability and increase funding costs for banks. Limits are described as a transitional safeguard to give the banking sector time to adapt its funding models and for authorities to assess how digital money affects credit provision. They would be applied per coin, meaning individuals could hold higher aggregate balances across multiple stablecoins.
The BoE also proposes exemptions for large corporates, such as major retailers and intermediaries, that may need to hold higher balances to process customer payments or manage liquidity. These exemptions are intended to avoid disruption to ordinary business operations while maintaining control over aggregate outflows and ensuring the limits still serve their financial stability purpose.
The BoE acknowledges that monitoring and enforcing these caps will be operationally complex. It highlights challenges such as tracking holdings across multiple wallets, identifying users with several accounts and implementing technical solutions through smart contracts. The Bank has not prescribed a specific approach and is seeking industry input on how limits could be monitored and managed, including whether issuers or intermediaries should be responsible and whether alternative mechanisms could achieve the same stability objectives.
Redemption and access
Systemic stablecoin issuers must ensure coin holders have a direct legal claim against the issuer and can redeem at par by the end of the business day. Fees may be charged if proportionate. Issuers will be expected to connect directly to payment systems to support interoperability and frictionless redemptions.
Safeguarding
Backing assets and reserves would be held in the UK under statutory trust, segregated from the issuer’s own assets and safeguarded by authorised custodians. The BoE will expect robust reconciliation, reporting and organisational controls.
Ledgers and technology
The BoE remains open to public permissionless ledgers if issuers can demonstrate control over accountability, settlement finality and operational resilience. Engagement on technology risk and resilience will continue through the Digital Securities Sandbox and future consultations.
Joint regulation and supervision
The BoE, FCA and HMT will operate a joint regime. The BoE will oversee prudential and systemic matters, and the FCA will supervise conduct and consumer protection.
Emerging areas
The BoE highlights three emerging areas.
Interoperability in money and payments
The BoE, FCA and HMT envisage a multi-money ecosystem where stablecoins, tokenised deposits, e-money and commercial bank money operate interchangeably. Technical and regulatory interoperability will be required to ensure value can move freely at par between different forms of money. The Retail Payments Infrastructure Board, chaired by the BoE, will design future payment architecture to enable this under the National Payments Vision.
Innovation in wholesale markets
The BoE and FCA will test the use of regulated sterling and non-sterling stablecoins for settlement in the Digital Securities Sandbox. The BoE is also developing synchronisation capabilities in RTGS, its system for instant interbank payments. The aim is to enable atomic settlement in central bank money and assess whether this or a wholesale central bank digital currency would best support tokenised markets.
Cross-border arrangements
The BoE proposes that non-UK issuers of sterling-denominated systemic stablecoins, recognised by HMT, must establish a UK subsidiary that holds backing assets and capital domestically, to safeguard UK financial stability.
For non-sterling systemic stablecoins, the BoE will engage first with the issuer’s home authority. It may defer to that authority’s framework if it delivers equivalent regulatory outcomes, includes credible failure arrangements and ensures strong cooperation and information sharing. This approach aligns with the BoE’s treatment of non-UK financial market infrastructures.
If the home regime does not provide comparable standards or sufficient cooperation, the BoE would apply UK-specific requirements.
What do firms need to do?
Assess where stablecoins could add value in your business model, from payments to liquidity management.
Start building internal understanding of the BoE and FCA regimes to identify when and how stablecoins could become material to your operations.
Model the impact of proposed capital, liquidity and redemption requirements on funding, cash management and customer flows.
The BoE’s consultation defines a clearer balance between innovation and financial stability in the UK’s approach to stablecoins. Firms across financial services, payments, technology and corporates should pay close attention. The proposed framework promises long-awaited clarity, but the proposed holding limits of £20,000 for individuals and £10m for businesses are the clear flashpoint. They are presented as a temporary safeguard, yet they affect commercial models, settlement processes and liquidity management. When combined with the 40 per cent unremunerated reserve requirement, these limits risk making sterling-backed stablecoins less viable and less competitive internationally. If the limits are retained for too long, they could stall adoption, restrict institutional use and weaken incentives for merchants and platforms to integrate stablecoin payments.
While these limits are intended to slow rapid deposit outflows during the transition, eventual adoption could still reshape how money flows through the system over time. Banks and lenders should prepare for potential shifts in deposits as stablecoins grow in use. According to the BoE’s analysis, large or rapid outflows from bank deposits into digital money could raise funding costs and reduce the availability of credit to households and businesses.
Payment providers and fintechs should review interoperability, custody and redemption models to align with the BoE’s expectations. Corporate treasurers may want to consider how future holding limits could affect intraday liquidity, payroll and supplier payments as adoption grows. Retail platforms face a practical challenge: monitoring individual holdings across multiple wallets to ensure compliance with the limits. Firms will need clear mechanisms for identification, tracking and reporting, which may require new technical solutions or partnerships.
Non-sterling stablecoins will also come under scrutiny. The BoE plans to assess whether oversight by foreign regulators delivers outcomes equivalent to its own regime or if UK-specific measures are needed. For firms operating across currencies, this introduces a new layer of complexity but also an opportunity to shape consistent international standards.
The technology underpinning stablecoins is proven and has been tested at scale globally. The foundations for safe, programmable and efficient digital money already exist. What the industry now needs is clarity from the BoE and the FCA to enable implementation, innovation and scale. Future rules should be coherent across borders and deliver international equivalence so that firms can build with confidence and users can trust that digital money works seamlessly wherever it is used.
“With over 300bn USD in stablecoins in circulation and 99 per cent pegged to the US dollar, the UK is already a spectator in a market it should shape. The challenge is not whether to regulate but how to create the conditions for sterling-backed stablecoins to scale safely and competitively. The UK has the credibility, infrastructure and regulatory reach to issue digital money with global influence. The BoE and FCA now need to enable innovation rather than just contain it, or the next wave of digital money and tokenised finance will be driven from global hubs such as New York, Singapore and Dubai, while London watches from the sidelines.”
Laura Talvitie
Digital Assets Regulatory Lead, PwC United Kingdom
Next steps
The consultation closes on 10 February 2026. The BoE will then consult on draft Codes of Practice later in 2026, setting out detailed requirements for systemic stablecoins. In parallel, the FCA is continuing to develop the wider UK cryptoasset regulatory framework.
Contacts
James Moseley
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