The Bank of England has unveiled its long-awaited proposals for regulating Pound sterling-denominated stablecoins, marking a major step toward integrating digital money into the UK’s financial system.
The consultation paper, published earlier today, outlines how the central bank plans to oversee stablecoin issuers and ensure financial stability as the use of digital assets grows.
The document forms part of the UK government’s broader strategy to position the country as a global hub for fintech and digital innovation. They build on previous consultations by HM Treasury and the Financial Conduct Authority (FCA), setting out the Bank’s approach for stablecoins that could play a significant role in payments or financial markets.
Under the new framework, the Bank would regulate “systemic stablecoins”. The aim is to provide safeguards similar to those that already apply to commercial bank money, ensuring that consumers can trust digital pounds as much as they do traditional ones.
According to the consultation, stablecoin issuers will need to hold high-quality liquid assets to back their tokens fully. They will also be required to maintain strong governance, risk management, and operational resilience standards.
Importantly, the regime would ensure that holders can redeem their holdings, valued at 1 for 1 Pounds sterling at all times.
Bank of England Embraces Stablecoins
The Bank of England’s Deputy Governor for Financial Stability, Sarah Breeden, said the proposals were designed to “enable innovation while protecting financial stability and consumer confidence.”
She emphasised that as digital money evolves, it must operate under clear and consistent standards that maintain trust in the UK’s monetary system.
The consultation also considers how systemic stablecoin arrangements, including issuers, wallet providers, and payment systems, would be brought under the Bank’s supervisory remit. These entities would face requirements similar to those applied to traditional payment systems deemed systemically important.
The Bank’s framework is being developed alongside the FCA’s regime for non-systemic stablecoins, creating a coordinated dual approach to regulation. While the Bank focuses on stability and systemic risk, the FCA will oversee conduct, consumer protection, and market integrity.
The proposals come at a time of increasing interest in digital currencies worldwide. Central banks and regulators are grappling with how to manage the rise of private stablecoins such as Tether and USDC, which have grown to play a major role in crypto markets.
The UK’s approach seeks to bring these innovations under a regulatory structure that protects both users and the wider financial system.
Industry players have welcomed the move as a step toward regulatory clarity. Clear rules, they argue, could attract more institutional participation and accelerate the adoption of digital money in mainstream payments.
The bank is inviting feedback on its consultation until February 6, 2026. Following this period, it plans to finalise the regime and begin implementation once legislation is in place.