The Bank of England (BoE) unveiled a draft regulatory regime for systemic stablecoins aimed at ensuring financial market stability and overseeing digital asset issuers.
In a consultation paper, the BoE outlines requirements for reserves, capital, and ownership limits for issuers of sterling-pegged stablecoins, as well as principles for designating stable assets as systemically significant.
According to the document, the proposed regulation includes the following key provisions:
- Reserve assets. At least 40% of an issuer’s reserves must be held as unremunerated deposits with the Bank of England, and up to 60% in short-term securities. For new projects, up to 95% may initially be held in securities, with a gradual reduction to 60%.
- Ownership limits. Individual holders will be limited to £20,000 per person, while companies may hold up to £10 million. Exceptions may apply if higher limits are justified by business needs.
- Capital and liquidity. Issuers must maintain capital equal to the higher of either six months of operating expenses or the amount of losses required to restore stability after a stress event.
Additionally, issuers must hold an extra liquidity buffer to cover risks related to their core reserve assets, set at approximately 0.46% of total reserves if securities make up 60% of those reserves.
The Bank of England plans to complete public consultations and finalize the regulatory requirements by 2026.
The document also sets parameters for recognizing stable assets as systemic, which entails special supervisory principles. Decisions on granting such status will be made jointly by HM Treasury (HMT), the Bank of England, and the Financial Conduct Authority (FCA).
To be deemed systemic, a stablecoin will be assessed against the following criteria:
- Scale of use. The number of tokens in circulation and users. The greater the share in retail or corporate payments, the higher the likelihood of being designated as systemic.
- Role in payment infrastructure. Stablecoins used in settlement and clearing systems, including interbank and cross-border payments, may be considered critical to financial system stability.
- Transaction volume and speed. High turnover and settlement speeds increase systemic importance, particularly if the asset is widely used across the economy.
- Interconnectedness with financial institutions. Close links between an issuer or operator and banks, payment services, or major trading platforms amplify potential systemic risk.
- Impact of disruptions. Authorities will assess potential market effects from a loss of confidence, security incidents, or sudden liquidity drops.
- Size of reserve assets. Large sterling-denominated reserves concentrated within a single issuer can themselves create systemic risk.
Sarah Breeden, Deputy Governor for Financial Stability at the BoE, noted that the widespread adoption of stablecoins could pose risks to the banking sector through liquidity redistribution. The proposed framework aims to minimize these threats and establish a robust infrastructure for digital currencies in the U.K.
The first licensed sterling-pegged stablecoin was launched in June 2025. Comprehensive crypto regulation is expected to take effect in 2026, requiring all crypto service providers operating in the U.K. to collect user and transaction data under the Crypto-Asset Reporting Framework (CARF).
