Bank of England Moves Closer to Stablecoin Oversight with New Proposal
The Bank of England has unveiled an extensive plan to regulate stablecoins, signaling a decisive step toward integrating digital assets into the UK’s financial framework.
The consultation, published on Monday, outlines how “systemic” stablecoins—those used broadly for payments—should be backed, supervised, and limited in circulation to safeguard financial stability.
According to the proposal, the central bank aims to prevent potential disruptions in the payments network by ensuring that sterling-based stablecoins are supported by highly secure assets. The paper marks one of the most detailed attempts yet by a major central bank to define how fiat-backed digital tokens should operate within a regulated economy.
A Two-Tier Backing Structure for Stablecoin Reserves
Under the Bank’s draft framework, stablecoin issuers would be required to keep at least 40% of their reserves as non-interest-bearing deposits directly with the Bank of England. The remaining 60% could be held in short-term UK government securities, allowing issuers to maintain liquidity while minimizing risk.
Systemic issuers—those handling large-scale transactions or used widely across the economy—could initially be permitted to hold as much as 95% of their reserves in government bonds. Over time, that ratio would be scaled back to 60% once the stablecoin reaches a level of adoption that warrants tighter control.
The consultation will remain open until February 10, 2026, with final rules expected in the latter half of next year.
Limits on Holdings and Exemptions for Businesses
In an effort to manage systemic risk, the Bank proposed limits on how much stablecoin individuals and companies can hold. Retail users would be capped at £20,000 per token, while businesses could hold up to £10 million. However, commercial entities might qualify for exemptions if higher balances are needed for daily operations.
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The holding cap reflects the regulator’s view that digital money should complement, not replace, existing payment systems. The BoE emphasized that these limits may evolve as the sector matures and as more data becomes available on how stablecoins are actually used in payments.
Determining Which Stablecoins Are ‘Systemic’
Only stablecoins that are pegged to the British pound and widely adopted in the UK would fall under this new regime. The Treasury will play a key role in designating which payment systems qualify as “systemic,” after which they will come under the Bank of England’s direct oversight.
Non-sterling stablecoins, such as USDT or USDC, remain outside the current proposal. The Bank noted that it plans to coordinate with other jurisdictions on cross-border oversight and may revisit this category if non-GBP tokens achieve significant traction in the UK.
Concerns Over Self-Custody and Public Blockchains
Beyond the question of reserves and backing, the Bank raised caution about how stablecoins interact with public, permissionless blockchains and unhosted wallets. It warned that systems relying on self-custody or fully decentralized ledgers could pose challenges to accountability and settlement reliability.
Officials reiterated that such designs might hinder timely payouts if an issuer collapses, complicate enforcement of holding caps, and expose users to operational risks. The Bank said it will continue to study whether unhosted wallets are appropriate for large-scale use within the UK’s payment ecosystem.
Interest Payments on Stablecoins Still Under Review
The paper also revisited the issue of whether stablecoin holders should receive interest—an area the Bank sees as potentially conflicting with traditional banking operations. It maintained that interest-bearing digital money could alter the nature of stablecoins and may raise new questions about monetary policy transmission and financial stability.
Looking Ahead
The Bank of England’s initiative represents a major step toward formal recognition of stablecoins as part of the UK’s future payments landscape. If finalized, the rules would make the UK one of the first major economies to implement a clear and enforceable framework for fiat-backed digital tokens.
Market participants have until early 2026 to respond, but the direction is clear: stablecoins that aspire to systemic scale will face standards similar to those of traditional financial institutions.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
