The United Kingdom’s central bank is moving toward stablecoin regulation by publishing a consultation paper proposing a regulatory framework for the asset class.
The Bank of England (BoE) on Monday released a proposed regulatory regime for sterling-denominated “systemic stablecoins,” or tokens it said are widely used in payments and therefore potentially pose risks to the UK financial stability.
Under the proposal, the central bank would require stablecoin issuers to back at least 40% of their liabilities with unremunerated deposits at the BoE, while allowing up to 60% in short-term UK government debt.
The consultation paper seeks feedback on the proposed regime until Feb. 10, 2026, with the BoE planning to finalize the regulations in the second half of the year.
Holding limits, backing and oversight
As part of the proposal, the central bank suggested capping individual stablecoin holdings at 20,000 British pounds ($26,300) per token, while allowing exemptions from the proposed 10,000 pound ($13,200) for retail businesses.
“We propose that issuers implement per-coin holding limits of 20,000 GBP for individuals and 10 million pounds for businesses,” the BoE stated, adding that businesses could qualify for exemptions if higher balances are needed in the course of normal operations.
Regarding stablecoin backing, the BoE suggested that issuers that are considered systemically important could be allowed to hold up to 95% of their backing assets in UK government debt securities as they scale.
Related: Bank of England pledges to keep pace with US on stablecoin regulations
“The percentage would be reduced to 60% once the stablecoin reaches a scale where this is appropriate to mitigate the risks posed by the stablecoin’s systemic importance without impeding the firm’s viability,” it added.
What stablecoins are systemic?
BoE’s proposed regulatory regime specifically targets systemic GBP-pegged stablecoins, or those potentially seeing wide use for retail, corporate and cross-border payments.
The BoE noted that His Majesty’s Treasury determines which stablecoin payment systems and service providers are deemed systemically important. Once designated, these systems would fall under the proposed regime and the BoE’s supervision.
The framework explicitly does not target non-GBP stablecoins like Tether’s USDT (USDT) or Circle’s USDC (USDC):
“For non-sterling-denominated systemic stablecoins issued from non-UK entities, we consider the first step is to engage with the stablecoin issuer’s home authority […] We are also considering our approach to non-sterling denominated coins that could reach systemic levels of use in the UK.”
BoE concerned about self-custody, public ledgers and more
Additionally, the BoE said it would continue to monitor a number of aspects related to the proposed regulatory regime, including the use of unhosted, or self-custodial wallets, the prevalence of public permissionless blockchains and the practice of paying interest on stablecoin holdings.
“We maintain our view as set out in the discussion paper that public permissionless ledgers currently do not provide a clear locus of accountability and could result in heightened risks around operational resilience and settlement finality,” it said.
Regarding self-custodial wallets, it said they could impede the timely execution of payouts in the event of issuer failure and complicate the enforcement of holding limits.
“The bank will continue to monitor the risks associated with unhosted wallets, including their potential suitability for use at systemic scale within the UK payments landscape,” BoE stated.
Cointelegraph reached out to the BoE for comment regarding the proposed regime, but had not received a response by the time of publication.
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