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On Monday, the Bank of England (BoE) published a consultation paper outlining its proposed regulatory framework for sterling-denominated systemic stablecoins. The document introduces two unprecedented features: a holding cap for users and the potential for issuers to access central bank liquidity.
Why it matters
While Europe and the United States have already established stablecoin frameworks, the United Kingdom’s remains pending, even though the pound sterling is the world’s fourth most traded and widely held currency, according to the IMF. Yet unlike its peers, the BoE can implement its rules without parliamentary approval, giving it unusual latitude to shape the domestic market and influence global standards.
Defining “systemic”
At the heart of the proposal lies a key uncertainty: what exactly counts as a “systemically important stablecoin”? The Bank avoids hard thresholds, opting instead for qualitative measures such as user numbers or transaction volumes. This open definition leaves room for interpretation but also raises the risk of regulatory overlap between the Financial Conduct Authority (FCA), which would oversee smaller issuers, and the BoE, responsible for systemic ones.
Reserve assets
That boundary will matter in practice. Under the proposed split, FCA-regulated issuers could keep up to 95% of reserves in short-term UK government debt, while systemic issuers would need to hold 40% of their reserves directly at the central bank, without remuneration.
“The Bank of England wants to ensure that large-scale stablecoins always have sufficient liquidity to withstand a run,” explained Varun Paul, Senior Director at Fireblocks and a former BoE official. “However, the framework would offer less flexibility to systemic issuers compared with what’s allowed in the EU under MiCA and in the United States under the GENIUS Act. This could make UK stablecoins uncompetitive and force issuers to find alternative sources of revenue more quickly.”
Central bank access ?
That trade-off may be balanced by another novel idea hinted at in the paper: direct access to central bank liquidity for systemic issuers. Such access could give large stablecoin operators a buffer against redemption pressure and lower settlement costs, bringing them closer to the safeguards that apply to commercial banks.
“If implemented, it would be the first framework worldwide to permit this,” noted Varun Paul. “It would offer issuers a genuine safety net and make stablecoin operations more resilient.”
Holding limits and non UK subsidiary
To mitigate the risk of bank deposit flight, the Bank also proposes holding caps upon introduction: £20,000 per individual per issuer and £10 million for businesses, with exemptions possible for large corporates.
“The holding limit is intended as a prudential safeguard while the regime is still being tested and to protect bank deposits,” said Varun Paul. “But limiting holdings "per coin", as proposed, is unlikely to have the desired effect, and creates a number of logistical challenges for issuers and wallet providers.”
Foreign issuers, too, will face new obligations. Any non-UK-based firm offering sterling-denominated stablecoins will need to establish a local subsidiary, ensuring that supervision and consumer protections fall squarely under UK oversight.
What's next ?
The consultation remains open until 10 February 2026, allowing market participants to submit feedback. After reviewing responses, the Bank will refine the draft rules for a second consultation, aiming to finalize the framework by end-2026.
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