UK Proposes Regulating Systemic Stablecoins - December 2025

03 Dec 2025

Client Alert

In a MoFo Minute:

The Bank of England (BOE) released a consultation paper (the Proposal) outlining a regulatory regime for UK payment stablecoins issued by non-banks. Comments are due February 10, 2026.
The Proposal addresses key definitions, obligations, and applicable regulators.
The Proposal represents the BOE’s “vision for the future” that the UK payments landscape be “multi-money.”

Overview

On November 10, 2025, the BOE released the Proposal, setting out proposed rules for sterling-denominated systemic stablecoins issued by non-banks for use in UK payments. The BOE is seeking public feedback, and comments are due February 10, 2026.

Systemic Stablecoins & Other Terms

Per the Proposal, systemic stablecoins are those widely used in UK payments whose disruption could threaten UK financial stability or significantly affect UK business or other interests.

A recognized payment system or service provider issuing such stablecoin is a “systemic stablecoin issuer” (SSI). Her Majesty’s Treasury (HMT) designates these issuers based on various indicia, such as: (1) the number and value of transactions, current and forecast; and (2) the nature of transactions, such as wholesale or retail.

While the Proposal is aimed at non-bank SSIs, it will be of interest to banks following the BOE’s November 2023 Dear CEO letter, which stated that deposit-takers that want to issue stablecoins to retail customers should do so only from separate, non-depository, and insolvency-remote entities.

Relevant Regulators

In supervising SSIs, the BOE will adapt its existing financial market infrastructure (FMI) supervision framework to address stablecoin-specific risks.

The UK financial system has two main regulators: (1) the Prudential Regulatory Authority, a part of the BOE that regulates prudential requirements, and (2) the Financial Conduct Authority (FCA), which regulates conduct for market integrity and consumer protection. The Proposal sets out regulations as follows:

Category	Regulatory Regime
Systemic stablecoins for everyday payments	Joint BOE & FCA; home country authority, as applicable
Stablecoins as a settlement asset – used in core wholesale financial markets by BOE-regulated FMIs	Currently prohibited; if permitted, joint BOE & FCA
Stablecoins as a settlement asset – settlement in non-core wholesale financial markets by firms not BOE-regulated FMIs	FCA solo
Non-systemic stablecoins for payments	FCA solo
Other, such as using stablecoins for buying & selling cryptoassets	FCA solo

Core Requirements

The Proposal suggests specific requirements for stablecoins, summarized below:

Feature	Proposal
Backing Assets	At least 40% held as unremunerated deposits at the BOE Up to 60% held in short-term sterling-denominated UK government debt securities 40:60 ratio subject to step-up regime, permitting temporary hold of up to 95% in UK government securities Temporary deviations permitted to meet unanticipated redemption requests Potential central bank liquidity backstop lending facility
Capital & Reserve Requirements	Capital against general business risk sufficient to cover the higher of: (1) cost recovery from the largest plausible loss event; or (2) six months of current operating expenses Liquid asset reserves on statutory trust to mitigate the risk of backing assets and manage insolvency or wind down
Safeguarding of Backing Assets & Reserves	Backing assets to be held in the UK, on statutory trust, for benefit of coinholders Issuers to appoint qualified third parties to safeguard backing assets, other than those held with BOE Reserves to be held on statutory trust for the benefit of coinholders and insolvency practitioners
Holding Limits	Per-coin limit of £20,000 for individuals; £10 million for businesses (subject to potential exemptions for the largest businesses) Holding limits expected to be loosened and ultimately removed as financial risks are understood and mitigated
Legal claim and redemption	Coinholders to have legal claims for the value of their stablecoins against the issuer Coinholders to be able to withdraw funds on demand, at face value, without undue constraint or cost Issuers to meet redemption requests of any size and par Redemption processed by end of day and in real time Fees should be prohibited or reflect actual costs incurred
Location & Structure	Non-UK SSIs must establish a subsidiary in the UK to conduct business and issuance activities in the UK and with UK-based customers The subsidiary must hold backing assets and assets funded by capital in the UK
Interest	Systemic stablecoins should not be used as an investment vehicle SSIs should not pay interest to coinholders

Outstanding Issues

The Proposal notes certain issues still to be determined by the BOE. For example, the BOE is weighing its approach to non-sterling-denominated coins that reach systemic use in the UK and suggested the BOE may defer to foreign regulatory authorities in those cases. The BOE mentioned its openness to the use of public, permissionless blockchains, so long as SSIs can demonstrate accountability, settlement finality, and operational resilience. SSIs will be considered accountable for their technology choices, the BOE cautioned.

Add Your Comment

The Proposal includes 23 questions for stakeholders, addressing backing asset calibration, capital structure, and cross-border coordination, among other topics.

In sharing comments and concerns with the BOE, it may be worth noting their priorities and objectives. In particular, the BOE is focused on maintaining financial stability, preserving trust in money, enabling interoperability, and supporting innovation. One area of focus for the BOE is on cross-border arrangements, including whether a home authority’s regulatory and supervisory framework delivers “broadly similar outcomes to the [BOE’s] regime for systemic stablecoins . . .” Similarly, cross-border arrangements remain the focus of U.S. regulators, as the recently enacted GENIUS Act seeks to ensure foreign stablecoin issuers are subject to “comparable” regulatory frameworks abroad, subject to the U.S. treasury secretary’s determination.

Market participants (both within and outside the UK) should begin assessing their readiness for regulation, compliance strategies, and technical pathways for interoperability under the Proposal, paying special attention to the differences between the Proposal and other regulatory frameworks and how those differences could impact a “broadly similar outcomes” or “comparability” analysis.

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Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Prior results do not guarantee a similar outcome.