Bank of England Regulatory Regime for Sterling-Denominated Systemic Stablecoins

The regime would apply after HM Treasury recognizes a payment system or service provider as systemic. Recognition is case-specific and may consider scale, the nature of use, substitutability, interconnectedness and potential effects on financial stability. A recognized systemic stablecoin issuer would be jointly regulated: the Bank would focus on prudential and financial-stability risks, while the Financial Conduct Authority would continue to supervise conduct, consumer protection and relevant qualifying-stablecoin activities.

The Bank's approach focuses primarily on non-bank issuers of sterling-denominated stablecoins used widely for retail, corporate or cross-border payments. Non-systemic stablecoins remain within the FCA-led regime. Overseas issuers of sterling-denominated systemic stablecoins would be expected to establish a UK subsidiary for UK issuance and business. The Bank also contemplates possible home-authority deference for non-sterling stablecoins that become systemic in the UK.

The June 2026 policy statement provides for one-to-one backing. Ordinarily, at least 30% of backing assets would be unremunerated deposits at the Bank and up to 70% could be sterling-denominated UK government debt with no more than six months' residual maturity. Issuers recognized as systemic at launch could initially hold up to 95% in eligible government debt under a step-up approach, with the share reduced as they scale.

The draft Code of Practice would require segregation of backing assets and reserves, daily internal and external reconciliation, and statutory trust arrangements intended to protect coinholders. The minimum capital requirement would be the higher of six months of relevant operating expenses or the cost of executing recovery and orderly wind-down plans, excluding costs assigned to a separate wind-down reserve.

Coinholders would have a direct legal claim against the issuer and a right to redeem at face value. A full redemption request would have to be processed as soon as practicable and within 24 hours. Issuers would not be permitted to suspend redemptions. Fees should be avoided where possible and otherwise be fair, transparent and proportionate; deductions from the redemption payment would require the holder's consent.

Instead of the individual and business holding limits proposed in 2025, each systemic stablecoin product would face an initial temporary issuance maximum of £40 billion. The Bank says it would review, loosen and ultimately remove that guardrail once risks to UK credit provision are sufficiently mitigated. The framework would not impose separate limits on transaction size, frequency or use, subject to other legal requirements.

Issuer-paid interest or other returns linked to holding a stablecoin would be prohibited. Activity-based benefits tied to using a stablecoin for payments could remain permissible, provided they are not calculated by reference to the period for which the coin is held.

The current canonical status is Under consultation. The Bank intends to finalize the Code by the end of 2026 and expects further guidance, trust and failure-arrangement rules, supervisory materials and updates to the recognized-payment-system Code during 2027. A joint Bank-FCA publication on recognition, transition and overlapping requirements is also pending.

The draft still identifies statutory trust legislation as an outstanding enabling step. Coinholder claims would not be covered by the Financial Services Compensation Scheme, and detailed failure provisions remain subject to later work. Editors should therefore distinguish the already-operative statutory oversight powers from the proposed issuer requirements, which cannot be treated as effective until the final Code has a commencement date and applies to an HM Treasury-recognized entity.