A cautious step forward: the Bank of England’s proposed regime for systemic stablecoins

The Bank of England has published its long-awaited consultation paper on a regulatory framework for sterling-denominated systemic stablecoins – stablecoins that could become widely used in the UK for everyday payments and therefore may pose risks to UK financial stability. 

The proposals set out how the Bank intends to regulate sterling-denominated systemic stablecoins, while operating alongside FCA oversight for conduct, consumer protection, and market integrity.

Key features include temporary holding limits for users, a new model for backing assets that includes a certain proportion which can be held in UK government debt securities, regulatory capital requirements, same-day redemption requirements, and safeguarding requirements. The consultation also confirms that permissionless blockchains can be used, although issuers remain fully accountable for operational and cybersecurity risks.

For firms operating in or considering entry into the UK stablecoin market, this is a pivotal moment to assess the impact of the proposed regime and to engage with the Bank of England. Read our full briefing here.