The Bank of England has released a consultation paper outlining its proposed regulatory framework for sterling-denominated systemic stablecoins, which includes limits on holdings for both individuals and businesses.
According to the proposals, systemic stablecoin issuers will be allowed to hold up to 60% of their backing assets in short-term UK government debt. The remaining 40% can be managed through unremunerated accounts, ensuring robust redemption options and maintaining public confidence, even during times of stress.
Issuers deemed systemic at launch, or those transitioning from the FCA regime—which governs the buying and selling of cryptocurrencies via stablecoins—will initially be permitted to hold up to 95% of their backing assets in short-term UK government debt, supporting their growth and viability.
Additionally, the central bank is contemplating a liquidity backstop to assist systemic issuers unable to monetize their backing assets in private markets.
The proposed regulations have generated controversy within the sector, particularly regarding temporary holding limits of £20,000 per coin for individuals and £10 million for businesses. Critics argue that such caps could hinder growth and diminish the UK’s competitiveness in an increasingly dollar-centric digital economy.
The Bank states that these limits arise from a new analytical approach designed to assess potential risks related to rapid outflows of bank deposits into new forms of digital money. The limits may be lifted once the transition no longer poses risks to the financial system. Notably, these caps would not apply to stablecoins utilized for settling wholesale financial market transactions within the Bank and FCA’s Digital Securities Sandbox.
Sarah Breeden, Deputy Governor for Financial Stability, remarked, “Today’s proposals represent a significant step towards establishing the UK’s stablecoin regime next year. We aim to foster innovation and build trust in this emerging currency, having carefully considered feedback to refine our approach, especially regarding how stablecoin issuers engage with the Bank of England. These proposals are designed for a future where stablecoins can play a meaningful role in payments, providing the necessary clarity for the industry to plan confidently.”
The consultation period will remain open until February 10, 2026.