Stablecoins will be regulated in the U.K. by next year, as per the Bank of England (BoE). In a fresh development, the BoE has released the draft version of its proposed stablecoin regulations, inviting feedback from the financial and digital asset players. In its official post, the BoE acknowledged that stablecoins can play a key role in completing financial settlements faster and in a more cost-effective way.
The consultation paper released on Monday, November 10 claimed that the BoE plans to cement GBP-backed stablecoins as legitimate and regulated part of the “multi-money” system that already includes commercial bank money and tokenized bank deposits.
“We are setting out clear standards to ensure that systemic stablecoins purporting to be money deliver stability of nominal value, robust legal claim, and the ability always to redeem at par in fiat currency,” BoE said.
Among highlights from the proposal, the BoE has proposed to cap individual stablecoin holdings at GBP 20,000 per token and GBP 10 million for businesses.
The bank has also suggested that stablecoin issuers must hold 40 percent of their stablecoin-backing funds at the BoE and be allowed to invest in short-term UK government debt.
In conversation with CoinHeadlines, Brett Hillis, Partner and crypto regulation expert at international law firm Reed Smith said that this regulation could be a watershed moment in the UK’s push to become a digital assets hub.
“The Bank’s proposed holding cap on stablecoins, even with statements that it is an initial measure while the effect on holdings of bank deposits can be assessed, has caused concerns in the industry, and can be viewed as delaying the final form of the regulations,” Hillis said. “The big question is how attractive the new regime will make the UK for stablecoins. Uncertainty is often the enemy of innovation, and this has been reduced today.”
The central bank of the U.K. has identified three main categories of stablecoin use-cases – for everyday payments, for wholesale settlements, and for personal uses. These listed use cases of stablecoins will be jointly regulated by the BoE as well as U.K. ‘s Financial Conduct Authority (FCA). Non-systemic stablecoin payments that will be separate from retail and corporate uses like crypto purchases,meanwhile, will be overseen solely by the FCA, the BoE noted.
The BoE also highlighted that His Majesty’s Treasury (HMT) will determine which stablecoin payment systems and service providers are authenticated to offer services in the U.K.
The feedback window on these regulations are open until February 1, 2026, only after which will the final rules be declared.
Stablecoins are crypto assets that derive their values from underlying reserve assets like fiat currencies. These tokens essentially maintain their value in a 1:1 ratio with the underlying assets. Tether and USDC are the top two stablecoins, both pegged to the US dollar.
Earlier this year, President Donald Trump signed the stablecoin-focussed GENIUS Act into law, clarifying the dos and don’ts for the issuers of these tokens in the U.S. Other nations like Pakistan are also shifting focus towards exploring these assets.