Proposed Rules from the Bank of England to Regulate Systemic Stablecoins

This update explains the Bank of England’s (the "BoE") proposed regime for regulating sterling‑denominated systemic stablecoin issuers and payment system operators (and other service providers recognised as systemic in the supply chain) as set out in its consultation paper issued on 10 November 2025; in particular its impact on banks and other participants in wholesale financial markets.

This supplements the May 2025 FCA consultation paper on the regulation of non-systemic stablecoin issuers and custodians.

Who and what does the proposed regime apply to?

• It applies to systemic sterling stablecoins used for certain wholesale and retail UK payments.
• It captures issuers of stablecoins, payment system operators using stablecoins, and other entities recognised by HM Treasury as systemically important in their supply chains. The BoE states this may include cloud outsourcing providers, encryption software providers, or firms providing the digital infrastructure to operate the ledger.
• It does not apply to banks issuing tokenized deposits, who remain under the Prudential Regulatory Authority (PRA) existing banking framework.

Are there any requirements for non-UK firms to incorporate in the United Kingdom?

• Yes. The UK Banking Act empowers the BoE to issue directions, including location requirements, to recognised/designated systemic stablecoin issuers. For sterling‑denominated systemic stablecoins issued by non‑UK firms, the BoE proposes that it will need to establish subsidiaries in the UK to issue to and do business with UK consumers, with backing/reserve assets and assets funded by capital to be held in the UK.
• This ensures the regime’s requirements—especially holding central bank deposits and any BoE liquidity facilities—apply directly to issuers and that prudential supervision and financial stability risks are managed within this jurisdiction.

What criteria is used to determine if a stablecoin is systemic?

• Recognition of a stablecoin as systemic under the BoE stablecoin regime rests on statutory tests under the UK Banking Act, with HM Treasury consulting the BoE (and the FCA and Payment System Regulator as relevant). The BoE’s advice considers:
  • scale and value of transactions;
  • substitutability of service;
  • interconnectedness with other financial market infrastructure (“FMIs”) and the real economy;
  • use by public authorities; and
  • whether links could undermine confidence in UK fiat money.
• The BoE emphasises case‑by‑case judgement instead of rigid thresholds and may recommend prospective designation/recognition of issuers and other entities as “systemic at launch” where network effects and integration imply rapid scaling.

Which systemic stablecoins fall under the BoE/FCA joint regime and which non-systemic stablecoins fall under the FCA solo regulated stablecoin regime?

What assets are required to back the systemic stablecoins issued in the UK?

• The BoE proposes that systemic stablecoins must be backed by a combination of unremunerated deposits at the BoE and short‑term sterling‑denominated UK government debt securities. Systemic stablecoin issuers will be permitted to receive a return on a portion of their backing assets.
• At least 40% of backing assets must be held as unremunerated central bank deposits to ensure immediate liquidity for redemption in normal and stress conditions. Up to 60% may be held in short‑term UK government debt to support business model viability, consistent with emerging international regimes.
• Temporary deviations are permitted to meet large, unanticipated redemption requests, subject to notification and rebalancing plans. Issuers may lend securities via repurchase agreements to generate liquidity but may not borrow securities via repo. The BoE is considering a backstop lending facility, allowing eligible, solvent and viable issuers to borrow against UK government securities in limited circumstances.

What capital and reserve requirements will be imposed on stablecoin issuers?

• The capital framework is risk‑based. Issuers must hold capital against general business risk equal to the higher of (i) six months’ current operating expenses or (ii) the cost of recovery from the largest plausible loss event. Eligible capital instruments should be paid‑up capital, share premium, retained earnings, and disclosed reserves, broadly analogous to CET1 (common equity tier 1) for banks, with assets funded by capital being high-quality and sufficiently liquid. Further supervisory guidance will follow in 2026 on capital requirements.
• In addition, issuers must hold two reserves of liquid assets on statutory trust, ring‑fenced from the issuer’s general estate:
  • A financial risk reserve: which covers market risk from holding short‑term UK sovereign debt and price impact when monetising under stress; calibration references the PRA’s simplified standardised approach for interest rate position risk with an interest rate multiplier currently at 1.3, and at least the Sterling Monetary Framework haircuts for eligible securities currently set at 0.5% of fair value; and
  • An insolvency/wind‑down reserve: which covers the costs of appointing an insolvency practitioner, continuing critical services, and distributing or transferring coinholder assets; issuers must maintain up‑to‑date wind‑down plans validated by external auditors and hold high‑quality reserve assets, potentially with slightly longer maturities suited to the intended use.
• Issuers may retain income or gains from these reserves, provided trustee duties and other legal obligations are met.

Can systemic stablecoins bear interest to the coinholder?

• Consistent with the principle that systemic stablecoins should be used for payments rather than investment, issuers of systemic stablecoins must not pay interest to coinholders. This mirrors treatment of any potential digital pound by the BoE and aligns with the FCA’s proposed rules for non‑systemic stablecoins.
• While issuers of systemic stablecoins may earn income on the permitted portion of backing assets and reserves, such income may not be passed through as interest to coinholders.
• The BoE notes the prevalence of usage incentives such as rewards or points for coinholders and will consider whether and how such practices would be permitted for systemic stablecoin usage in future guidance.

What restrictions will apply on the amount of stablecoins which retail and wholesale coinholders can hold?

• To mitigate potential disorderly deposit outflows from the UK banking sector, the BoE proposes per‑coin holding limits for systemic retail and corporate stablecoins.
• Individuals would be subject to a £20,000 per‑coin limit. Businesses/Corporates would be subject to a £10 million per‑coin limit, with exemptions to be agreed where higher balances are needed in the ordinary course of business. Limits operate per coin, not per issuer, so an individual could hold £80,000 across four different systemic coins at a given time.
• The BoE intends to loosen and ultimately remove these transitional limits once it is comfortable that risks to monetary and financial stability and credit provision have subsided; it will monitor adoption and usability impacts, acknowledging operational challenges in implementing smart‑contract‑level limits and cross‑wallet monitoring.

What are the proposed rules for redemption of systemic stablecoins?

• The regime requires that all coinholders have a robust legal claim against the issuer. The issuer must:
  • On demand: permit redemptions at any time;
  • Payment: complete redemption transfers by the end of the business day on which a valid redemption request is made, subject to coinholders having submitted necessary AML/KYC documentation in advance; and
  • At par: redeem at face value, less any permissible fees. While issuers may use intermediaries to fulfill redemptions, outsourcing does not discharge the issuer’s obligation to provide direct redemption when requested.
• Fees for redemption are not prohibited per se, but any charges must be fair, transparent, and proportionate to costs, and should not be used to pass on losses from backing asset sales or to disincentivise redemption.
• The BoE expects systemic stablecoin issuers to have direct access to payment systems. This would enable operations such as on- or off-ramping and payments from commercial bank accounts into stablecoin accounts (and vice versa) to be conducted frictionlessly and settled in central bank money. If systemic stablecoin issuers are unable to access such payment systems directly, they may need to hold some cash balances at commercial banks strictly as a “float” to facilitate redemption requests.

What rules will the BoE impose on safeguarding of backing assets and reserves held on behalf of the stablecoin issuer?

• Backing assets must be held on statutory trust in the UK on terms like those under existing FCA client asset rules.
• Coinholders would have proprietary claims protected in both going concern and insolvency scenarios, supplemented by a residual unsecured debt claim to the extent of any shortfall.
• Issuers will act as trustees and must appoint qualified third‑party UK‑authorised custodians for backing assets other than deposits held at the BoE, exercising due skill, care, and diligence in selection and managing risks through general business risk capital. The statutory trust must also hold the financial risk and insolvency/wind‑down reserves on similar terms.
• Detailed safeguarding rules will address segregation, reconciliation to issuance, shortfalls, etc. The BoE will consult further in 2026.

Will the BoE regulate the custodians’ e-wallet providers who provide custody for systemic stablecoins or cryptoasset trading platforms which trade in them?

• Custodial wallet providers are critical to coinholder access and redemption. The BoE intends to rely principally on the FCA’s proposed custody rules (for holding qualifying cryptoassets in e-wallets and other arrangements). The BoE may consider that a custodial wallet warrants recognition by HM Treasury as a service provider. This may be appropriate, for example, if the custodial wallet provider provides custody services for most of the systemic stablecoins in circulation.
• Cryptoasset trading platforms may be regulated by the BoE as a service provider or payment system operator (where relevant and subject to HMT recognition under the UK Banking Act), if providing stablecoin custody or payments processing services in a systemic stablecoin payment chain. 

How will the BoE regulate non-sterling stablecoins which are systemic in the UK?

For non‑sterling‑denominated stablecoins that could become systemic in UK payments, the BoE is considering relying on the foreign regulator where regulatory outcomes are broadly equivalent and cooperation and information‑sharing are sufficient to safeguard UK financial stability. The BoE’s assessment of equivalence is discussed in further detail in the consultation.

What are next steps?

• Stablecoin coin issuers and payment system operators will need to consider whether they may qualify as systemic under the proposed regime.
• Banks acting as third-party custodians holding backing assets and/or reserves for stablecoin issuers will need to consider these rules in light of the obligations on issuers and any administrative functions they may provide (e.g., account reconciliation of reserve amounts).
• E-wallet and custodians providing custodial services to corporate will need to consider rules relating to holding limits and how these will be implemented to monitor the aggregate amounts held by customers.
• The consultation closes on 10 February 2026.