The United Kingdom’s central bank is moving toward stablecoin regulation. A comprehensive consultation paper was issued by the Bank of England (BoE). The present paper suggests a regulatory framework of systemic stablecoins. It is a crucial move to introduce the stablecoin regime in the UK in the future. Feedback on the proposals should be received by February 10, 2026. As such, the new rules will be implemented in the year 2019.
On Monday, the BoE published its regulatory framework of sterling sterilised systemic stablecoins. Besides, these are extensively applied in payments. They can therefore be detrimental to the UK financial stability. These suggestions are deemed suitable to a future when the role of the stablecoins is significant. Thus, the industry acquires the transparency it needs to plan with more confidence.
The proposal regime will not include stablecoins that are not utilized as assets in a non-systemic manner. As an example, this involves the purchase and sale of crypto assets. The latter activity will be within the Financial Conduct Authority (FCA). Only systemic stablecoins are supervised by the central bank and exclusively on the risk of prudential and financial stability. The FCA on the other hand manages conduct and consumer protection.
Supporting Asset Rules and Liquidity Plans Detailed.
Systemic stablecoins will impose certain conditions on the assets of issuers. Earlier on, the central bank planned on requiring 100% of the reserves to be kept at the BoE with zero interest. Nevertheless, significantly, the new proposal enables systemic issuers to back up to 60 percent of assets in backing securities of short-term UK government debt. This compromise would be made after considering industry feedback.
The rest 40 percent of backing assets should be in the form of unremunerated deposits at the Bank itself. In addition, the provision is aimed at making sure that there are strong redemption capabilities. Accordingly, the new building facilitates confidence of people even when under extreme stress. The Bank is also thinking of using central bank liquidity facilities. This will then assist systemic stablecoin issuers when they are stressed.
Temporary Holding Limit Suggested on People and Companies.
A significant characteristic of the new consultation is temporary holding limits. First, the Bank of is suggesting that any person should have a limit of £20,000 per stablecoin. In addition, it is also proposed that a limit of one hundred and ten million pounds per business should exist. These caps are not applied to wholesale use in the Digital Securities Sandbox.
This is in line with the past history of Central Bank Digital Currency (CBDC) debates. The limits recommended by the Bank protect further access to credit. Finally, they will be eliminated after the transition ceases to be dangerous to the supply of finance to the real economy. Critics however argue that the caps can suppress innovation.
Step- up regime in the new rules
There is also a step- up regime in the new rules. Systemic stablecoin issuers Since the inception of a stablecoin, systemic issuers may initially maintain up to 95 percent of the assets backing their issuance in short term government bond holdings. As they increase, this percentage would be scaled down to 60%. This liberal policy is meant to promote the sustainability of new systematic issuers.
The proposals were commented upon by Sarah Breeden, who is the deputy governor of Financial Stability in the Bank .She explained that the mission of the Bank of England is still to contribute to innovation and develop trust. These propositions, she explained, are worth the future when stablecoins have a significant part in payments. The ultimate regulations will be released once the consultation is over. In 2026, a joint approach document will also be published by the Bank and the FCA. This will demystify the working part and facilitate the smooth transitions.