Bank of England Proposes New Rules to Regulate Systemic Stablecoins

The Bank of England (BoE) has unveiled a consultation paper detailing its plans to regulate systemic stablecoins, digital currencies designed to maintain a stable value against the pound sterling. The proposals, published on November 10, aim to ensure that stablecoins are sufficiently secure for everyday payments while protecting the broader UK economy.

Systemic stablecoins are digital tokens whose value is linked to traditional money, such as the pound, or to assets like government bonds. They are considered systemic when they reach a size or level of usage where any failure could impact the UK’s financial system, much like major banks are regulated. According to the BoE, this initiative represents a “significant step” toward preparing for a future in which digital and traditional money coexist, providing consumers and businesses with a wider range of payment options.

The consultation paper outlines several new rules designed to ensure that stablecoins remain safe and trustworthy. Issuers must hold backing assets that guarantee each coin’s value, with up to 60 per cent allowed in short-term UK government debt and the remainder held as cash in a Bank of England account. To give new issuers additional flexibility, systemic stablecoins launching for the first time may temporarily hold up to 95 per cent of assets in government debt to maintain stability during early growth. The Bank is also considering emergency liquidity arrangements—essentially short-term loans—to prevent sudden failures during periods of financial stress. In addition, to safeguard the broader economy, the BoE proposes temporary holding limits of £20,000 per stablecoin for individuals and £10 million for businesses, although larger firms could apply for exemptions until the market matures.

The framework envisions joint regulation with the Financial Conduct Authority (FCA). Non-systemic stablecoins—those too small to threaten the financial system—will continue to be supervised by the FCA. If a stablecoin grows to systemic importance, regulatory responsibility would shift to the Bank of England, while the FCA would retain responsibility for consumer protection. A joint BoE–FCA document, expected in 2026, will clarify how the two authorities will coordinate oversight.

For British expats and digital investors, this represents a potential turning point. A regulated stablecoin backed by the Bank of England could provide a safer, pound-linked digital payment option, particularly useful for transferring funds between the UK and Europe without exposure to the volatility of cryptocurrencies. BoE Deputy Governor for Financial Stability Sarah Breeden said the initiative aims to “support innovation and build trust in this emerging form of money.”

The consultation will remain open until February 10, 2026. After reviewing responses, the Bank plans to publish final Codes of Practice later in 2026, setting the official rules for systemic stablecoins. The framework may ultimately pave the way for the introduction of a UK digital pound in the coming years.

By fLEXI tEAM