Briefing
The Bank of England (BoE) has published its proposed regulatory regime for sterling-denominated systemic stablecoins, a pivotal move that operationalizes the UK’s “multi-money” strategy by establishing robust prudential standards for non-bank issuers. This framework fundamentally alters the liquidity and risk profile for systemic issuers, mandating that a significant portion of backing assets be held directly with the central bank to ensure immediate redemption capacity and mitigate financial stability risk. The core requirement is that systemic stablecoin issuers must hold a minimum of 40% of their backing assets as unremunerated deposits at the BoE, with the remaining 60% permitted in short-term UK government debt.
Context
Prior to this consultation, the UK digital asset landscape lacked a dedicated, high-resolution prudential framework for stablecoins used for payments, especially those reaching systemic scale. The prevailing challenge was regulatory inconsistency, where stablecoins were primarily used for non-systemic crypto-trading, falling under a less stringent regime. This ambiguity created a financial stability risk, as a widely adopted sterling stablecoin could fail without the backing of a clear, central-bank-led liquidity and reserve standard. The BoE’s action directly addresses this gap by defining a robust standard that applies once a stablecoin is designated as systemic by HM Treasury.
Analysis
This proposal imposes a material update to the capital and reserve management systems of prospective systemic issuers, moving the compliance focus from simple 1:1 backing to high-quality liquid assets (HQLA) held at the central bank. The requirement for 40% of reserves to be held as unremunerated BoE deposits introduces a direct cost of capital, pressuring issuers’ business models, which must now generate revenue from the remaining 60% of assets. Furthermore, the introduction of temporary holding limits → £20,000 for individuals and £10 million for businesses → mandates the immediate integration of a new, granular, system-wide transaction and wallet monitoring control layer into the issuer’s compliance framework. This creates a dual-track compliance system based on a stablecoin’s systemic designation and its holder’s size.
Parameters
- BoE Deposit Requirement → 40% → The minimum percentage of backing assets that must be held as unremunerated deposits at the Bank of England.
- Maximum Government Debt → 60% → The maximum percentage of backing assets permitted in short-term UK government debt securities.
- Individual Holding Limit → £20,000 → The temporary maximum holding limit per coin for individual users.
- Consultation Deadline → February 10, 2026 → The final date for industry feedback on the proposed regime.
Outlook
The next phase involves industry stakeholders submitting detailed feedback by the February 2026 deadline, particularly concerning the commercial viability of the unremunerated deposit requirement and the operational complexity of the temporary holding limits. The BoE expects to finalize the rules, likely in the form of Codes of Practice, later in 2026, setting a clear, precedent-setting standard for central bank oversight of systemic private digital money. This robust, prudential approach will likely become a benchmark for other major jurisdictions considering how to integrate stablecoins into their core financial infrastructure while prioritizing financial stability over pure commercial model flexibility.
