Bank of England opens consultation on ‘systemic’ GBP stablecoin rules with temporary holding limits

The Bank of England has launched a consultation on its proposed regulatory regime for sterling-denominated “systemic” stablecoins and a potential digital pound.

Published on Monday, the consultation paper outlines how such stablecoins could operate alongside existing payment systems for both retail and wholesale use. The move builds on reports of the proposal last week and feedback to a 2023 discussion paper, reflecting the bank’s aim to modernize payments while maintaining public trust in money, according to a statement.

Under the proposals, the regime would apply only to sterling-denominated stablecoins designated as systemic by HM Treasury and used at scale in UK payments — with the Bank of England overseeing prudential and financial stability risks and the Financial Conduct Authority supervising conduct and consumer protection.

It does not apply to non-sterling or existing stablecoins used mainly for buying and selling crypto assets, such as USDT and USDC, which will continue to be supervised by the FCA.

The bank said the framework is intended to be “robust and future-proof,” aligning with broader strategies to modernize UK retail payments.

Backing rules and temporary holding limits

A key feature of the consultation is the approach to backing assets. Systemic stablecoin issuers would be allowed to hold up to 60% of reserves in short-term UK government debt, with the remaining 40% placed in unremunerated accounts at the Bank of England to support redemption and public confidence, the bank said.

Issuers deemed systemic at launch or transitioning from the FCA regime could initially hold up to 95% of backing assets in short-term government debt to support early-stage viability. The central bank is also considering central bank liquidity arrangements to provide a backstop during periods of market stress.

To manage risks from rapid outflows of bank deposits into digital money, the Bank of England has also proposed temporary holding limits of £20,000 ($26,350) per stablecoin for individuals and £10 million ($13.2 million) for businesses, with exemptions for the largest firms to hold more if required. These limits would be lifted once the transition no longer poses risks to credit provision, the bank said, and would not apply to stablecoins used for wholesale settlement within the Digital Securities Sandbox operated by the Bank of England and the FCA.

“Today’s proposals mark a pivotal step towards implementing the UK’s stablecoin regime next year. Our objective remains to support innovation and build trust in this emerging form of money,” Bank of England Deputy Governor for Financial Stability Sarah Breeden said. “We’ve listened carefully to feedback and amended our proposals for achieving this, including on how stablecoin issuers interact with the Bank of England. These proposals are fit for a future where stablecoins play a meaningful role in payments, giving the industry the clarity it needs to plan with confidence.” 

The consultation runs until Feb. 10, 2026, with the Bank of England and the FCA set to publish a joint approach paper later next year to clarify how the rules will work in practice and guide a smooth transition.

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