Bank of England unveils landmark stablecoin regulation framework
The Bank of England (BoE) has taken a major step toward stablecoin regulation, releasing a consultation paper on Monday outlining how it plans to supervise sterling-denominated “systemic stablecoins.”
The framework aims to manage potential risks posed by tokens widely used for payments, which the BoE says could impact the United Kingdom’s financial stability if left unchecked, reports Cointelegraph.
Under the proposal, stablecoin issuers would be required to back 40% of their liabilities with unremunerated deposits at the BoE, while the remaining 60% could be held in short-term UK government debt. The consultation period runs until February 10, 2026, after which the BoE expects to finalize and implement the new regime in the second half of 2026.
Holding caps and asset backing requirements
The BoE’s proposal includes strict holding limits for individuals and businesses. Each person would be allowed to hold no more than £20,000 ($26,300) per stablecoin, while businesses could hold up to £10 million ($13.2 million) per token—though exemptions could be granted for companies requiring higher balances for operational needs.
The framework also adjusts asset backing rules as stablecoins grow in scale. Initially, systemically important issuers may hold up to 95% of their reserves in UK government debt, but this ratio would drop to 60% once the stablecoin becomes large enough to pose systemic risks. The BoE emphasized that these caps are designed to balance stability, liquidity, and market functionality without hindering innovation in the payments sector.
Systemic designation and regulatory oversight
According to the proposal, His Majesty’s Treasury will decide which stablecoin issuers and payment systems qualify as “systemically important.” Once designated, these entities will fall under the BoE’s direct supervision and will be subject to the new regime. The central bank stressed that its oversight will focus on ensuring convertibility, reserve transparency, and redemption guarantees, echoing concerns shared by global regulators about stablecoins’ potential to disrupt traditional finance.
The consultation represents the UK’s most detailed effort yet to establish a comprehensive framework for digital currencies, aligning with broader international moves to integrate stablecoins into regulated payment ecosystems while protecting financial integrity and consumer confidence.
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