On 10 November 2025, the Bank of England (BoE) published a consultation paper on its proposed regulatory regime for sterling-denominated systemic stablecoins.
Introduction
The BoE published on 10 November 2025 a consultation paper proposing a regulatory framework for sterling-denominated systemic stablecoins - digital money designed to maintain stable value that could be used for retail payments and as settlement assets in core wholesale financial markets. Building on industry feedback to the BoE's 2023 discussion paper, the proposals aim to ensure a robust and future-proofed regulatory framework that supports innovation while maintaining confidence in emerging forms of money.
Systemic stablecoins - those widely used in payments that may pose risks to the UK's financial stability - will be regulated by the BoE and Financial Conduct Authority (FCA), once they are recognized by HM Treasury (HMT). The consultation paper outlines the BoE's policy approach for regulating sterling-denominated systemic stablecoins issued by non-banks for use in UK payments. For banks, the existing banking regulatory regime applies: banks that wish to issue tokenized deposits and other new forms of digital money including stablecoins are expected to follow the approach outlined in the PRA's 2023 Dear CEO letter on innovations in the use by deposit-takers of deposits, e-money and regulated stablecoins.
Once recognized by HMT, systemic stablecoin issuers will fall under the BoE's regulatory remit under the Banking Act 2009. This means they will be subject to the BoE's power to obtain information, issue principles and Codes of Practice, require the establishment of system and service provider rules, and make directions, as well as powers of enforcement over systemic stablecoin issuers that do not adhere to the BoE's regulatory requirements.
Issuers of stablecoins used for non-systemic purposes (e.g., settlement in non-core wholesale markets or that are not widely used for payments), as well as stablecoins used for buying and selling of cryptoassets, will remain under the supervision of the FCA.
Key Proposals
Cross-Border and Transitional Challenges
The consultation paper acknowledges industry feedback around the risk of operational and compliance complexities associated with divergence between the UK's proposed rules and the approach of other jurisdictions. Inconsistent rules across jurisdictions could create operational difficulties for stablecoin issuers with cross-border businesses, which may face challenges in establishing or scaling operations in the UK.
Similarly, stablecoin issuers moving from the FCA's non-systemic regime to BoE's systemic regime could face regulatory complexities during the transition - this risk may impact willingness to scale in the UK market due to uncertainty over compliance requirements and capital and resource demands.
Policy Revision
The PRA's paper acknowledges these and other concerns flagged by industry leaders. Key policy proposals that have been revised from the proposals in the discussion paper as a result of industry feedback include:
- Backing assets — concerns were raised that the BoE's original proposal to require stablecoin issuers to back their coins in issuance with 100% unremunerated central bank deposits would restrict the viability of UK stablecoin issuers' business models. In response, the BoE now proposes that stablecoin issuers will be allowed to hold up to 60% of backing assets in short-term sterling-denominated UK government debt securities. The BoE notes this is consistent with emerging regulatory regimes internationally. The remaining 40% will be held as unremunerated deposits at the BoE, ensuring redemption requests can be met in normal and stress conditions. Firms would be allowed to temporarily diverge from the 40:60 ratio to accommodate significant unexpected redemption demands. Additionally, stablecoin issuers recognized by HMT as systemic at launch, or those transitioning from the FCA's non-systemic regime, may initially be permitted to hold up to 95% of backing assets in short-term UK government debt to support their operational viability as they expand.
- Capital and reserve requirements — the BoE has retained its proposal to use the existing international standards (the CPMI-IOSCO Principles for Financial Market Infrastructures, PFMI) as a baseline for setting capital requirements related to general business risk of systemic stablecoin issuers, with certain amendments. The BoE proposes that systemic stablecoin issuers maintain capital to cover general business risk, and hold reserves of liquid assets on trust to address financial risk of backing assets and to facilitate insolvency/wind-down processes as necessary.
Policy Clarification
A key point of clarification on the BoE's proposed policy approach relates to holding limits - the BoE is proposing temporary per-coin holding limits of £20,000 for individuals and £10 million for businesses. There could be exemptions from the £10 million limit for businesses enabling the largest businesses to hold higher balances when necessary to support their operations. The expectation is that such limits would be loosened and ultimately removed once the BoE is comfortable that financial stability risks have been adequately assessed and managed.
The BoE has also published on 10 November 2025 its approach to assessing the risks to the economy from potentially large and rapid movements of bank deposits into new forms of digital money. This analysis has informed the proposed holding limits, and the consultation paper seeks input on alternative methods for managing these risks.
The BoE has also clarified its proposals in respect of the following policy topics: defining systemic importance; expectations around a coinholder's legal claim against the issuer and redemption rights; safeguarding of backing assets and reserves; the use of public permissionless ledgers; and operational resilience.
Looking Ahead
The consultation closes on 10 February 2026.
The BoE emphasizes that the consultation paper forms part of an ongoing policy development process for the UK's stablecoin framework and is not intended to set out detailed implementation requirements. Its primary purpose is to clarify the BoE's policy stance and to prepare for the next phase of work, which will involve Codes of Practice that specify the rules and expectations for systemic stablecoins. The BoE plans to consult on and finalize these Codes of Practice in 2026.
In 2026, the BoE also plans to publish and consult, together with the FCA, on the detailed design of the joint regulatory framework. A key aspect will be providing clarity on how the responsibilities of the respective authorities will apply in practice.
White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.
This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
© 2025 White & Case LLP
