Bank of England Moves to Rein In Stablecoins With Strict Oversight Plan
The Bank of England (BoE) is taking a major step toward regulating the rapidly growing stablecoin market.
In a newly published consultation paper, the U.K. central bank outlined a detailed plan to supervise sterling-backed systemic stablecoins — digital assets that could play a significant role in everyday payments.
The BoE warns that if these assets become widely adopted without proper safeguards, they could threaten the country’s financial stability.
🔐 Stablecoin Backing Rules: 40% Locked in the BoE
Under the proposal, stablecoin issuers must:
- Hold at least 40% of reserves as deposits at the Bank of England (earning no interest)
- Hold up to 60% in short-term U.K. government debt
This model is designed to ensure that every stablecoin is fully supported by safe, liquid assets — even if investors rush to cash out during a crisis.
The BoE plans to finalize regulations by late 2026, after seeking industry feedback until February 10, 2026.
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💳 Stablecoin Holding Limits to Reduce Systemic Risk
To stop individuals and businesses from concentrating too much wealth in a single asset, the BoE proposes:
- £20,000 per person per stablecoin
- £10 million per business, with possible exemptions for operational needs
These limits aim to prevent scenarios where a failing stablecoin drains commercial bank deposits — a concern raised by some French and German banking groups.
🏦 What Makes a Stablecoin “Systemic”?
Only GBP-denominated payment stablecoins that achieve large-scale adoption would fall under this regulatory regime.
The U.K. Treasury would decide which stablecoins become “systemically important”, placing them directly under BoE supervision — from issuance to settlement.
Notably, this plan does not apply to foreign-issued stablecoins like:
Though the BoE acknowledged they may require future oversight if usage grows dramatically in the U.K.
🔍 BoE Signals Warning on Self-Custody and Public Blockchains
The central bank also raised concerns about:
- Self-custody wallets
- Permissionless blockchains
Regulators say they will continue to assess whether these technologies can operate safely at a national-payments level.
The BoE is also reviewing whether interest-earning stablecoins should be permitted, citing risks around investor behavior and financial stability.
✅ The Bottom Line
The Bank of England is making one thing clear:
Stablecoins destined for mass adoption must play by financial-system rules — not avoid them.
With the U.K. aiming to keep pace with the U.S. and EU on digital asset regulation, the message to crypto issuers is unmistakable:
📌 Prepare for tighter rules — or risk being locked out of the market.
