Key changes to previous proposals

Backing assets

Under the revised model, systemic stablecoin issuers must hold at least 40% of backing assets as unremunerated deposits with the BOE and 60% in short-term UK government debt (such as Treasury bills), with maturity limits to be specified in future Codes of Practice.

Temporary departures from this ratio are permitted to meet unexpected redemptions, subject to the BOE being notified and a credible restoration plan being put in place. Issuers may lend securities via repurchase agreements but may not borrow through reverse repos. The BOE is considering a backstop lending facility for eligible, systemic issuers under stress.

For stablecoins recognised as systemic from launch (those which are not yet operating at a systemic scale but are recognised as likely to do so in the future), issuers may initially hold up to 95% in UK government debt, gradually reduced to 60% as the stablecoin scales.

Capital and reserve requirements

The BOE continues to apply a risk-based capital framework modelled on the CPMI-IOSCO Principles for Financial Market Infrastructure (“PFMI”), adapted for stablecoin issuers. Issuers must hold capital equal to the greater of six months’ operating expenses or the cost of recovering from their largest plausible loss event. Capital must be held in the UK and include paid-up share capital, share premium, retained earnings, and reserves equivalent to Common Equity Tier 1 capital.

Issuers must maintain a financial-risk reserve held on statutory trust covering both market risk on short-term UK sovereign debt (referencing the Prudential Regulation Authority’s simplified standardised approach) and price impact when monetising those assets (at least equal to applicable Sterling Monetary Framework haircuts, currently 0.5% of fair value). Additionally, a wind-down reserve covering insolvency costs and fund returns to coinholders is required. Issuers must immediately notify supervisors if requirements are breached and submit restoration plans. The BOE may halt new issuance, require additional capital, or direct a solvent wind-down.

Clarification of previous proposals

Classification of an entity as “systemic”

The BOE clarifies what will constitute “systemic importance” for the purposes of the new regime and how it will be determined in practice. HMT must be satisfied that any deficiencies in the system or any disruption to the operation of the system would be likely to threaten the stability of, or confidence in, the UK financial system, and/or would have serious consequences for business or other interests throughout the UK.

In determining whether an entity is a systemic payment system or service provider, the BOE will provide recommendations and advice to HMT on the basis of factors set out in the Banking Act 2009, and any criteria set out in regulations passed by HMT. Such factors include:

• The number and value of the transactions that the payment system currently processes or is likely to process in the future.
• The value of the services that the service provider currently provides or is likely to provide in the future.
• The nature of the transactions processed or services provided, including the risk profile of the activity, whether the transactions are wholesale or retail, and the business’s organisational structure.
• Whether the transactions or services could be processed or provided by others, in particular whether the payment system or service provider is substitutable.
• The relationship between the entity and other entities, including the entity’s interconnectedness with other systemically important financial market infrastructures.
• Whether the payment system is used by the BOE in the course of its role as a monetary authority.

The BOE has declined to provide quantitative thresholds to avoid capturing entities that it would not otherwise view as systemic. The BOE has also confirmed that its assessment of entities in a systemic payment chain will be a holistic judgement made on a case-by-case basis.

Holding limits

The BOE also clarifies its proposals for holding limits, confirming plans to impose temporary per-coin holding limits of £20,000 for individuals and £10 million for businesses (subject to exemptions for businesses that require higher balances in the course of normal business). The limits aim to preserve financial stability by reducing the risk of large and rapid outflows of deposits from the banking sector. The UK market is particularly vulnerable to such outflows due to the heavy reliance on the banking sector for credit provision. These limits would be removed once the financial stability risks have been appropriately mitigated.

The Consultation Paper welcomes views on alternative steps that could be taken to prevent a disorderly transition to the regulation and potentially widespread adoption of systemic stablecoins, while still encouraging innovation, including views on other types of limits such as aggregate stablecoin limits and transaction limits.

Legal claims and redemption

The BOE confirms its previous proposal that coinholders should be provided with a robust legal claim against issuers for the value of their stablecoins, and should be able to withdraw their funds on demand at the face value of the stablecoins. Issuers will be required to honour redemption requests by the end of the business day on which a request is made, and free of charge where possible. Otherwise, redemption fees should be proportionate to the costs incurred.

The BOE will allow issuers to use intermediaries, such as cryptoasset-fiat exchanges, to facilitate redemptions, as long as issuers can demonstrate that they have sufficiently mitigated the risks at hand. Outsourcing will not discharge issuers from their obligations.

Safeguarding of backing assets and reserves

The BOE has confirmed its proposal that backing assets should be held in the UK and held on statutory trust for the benefit of coinholders, but has provided additional clarification. Issuers will be required to appoint qualified third parties to safeguard the backing assets, and reserves of liquid assets for financial risk and insolvency costs should be held on statutory trust for the benefit of coinholders and insolvency practitioners. This safeguarding model draws from the FCA’s Client Assets Sourcebook and is consistent with the FCA’s approach to non-systemic stablecoins.

The BOE intends to implement this regime until further arrangements are in place, which the BOE is working with HMT and the FCA to develop. Consultation on the detailed proposals for the safeguarding regime will be released in 2026.

Ledgers

The BOE confirms that it is open to the use of public permissionless ledgers by issuers, so long as the issuers can meet expectations and ensure confidence and trust in money. The BOE will continue to engage with industry to develop solutions to mitigate the risks that public permissionless ledgers pose to accountability, settlement finality, and operational resilience.

Operational resilience and approach to service providers

The BOE confirms its plan to apply its existing Codes of Practice, including its Code of Practice on Operational Resilience, and will work with the FCA to determine an appropriate operational resilience regime for service providers that fall under joint regulation. The BOE will also provide additional guidance in future publications, including a joint BOE-FCA publication and a supplementary supervisory statement providing detailed guidance on how and when all relevant BOE rules will apply.

Unchanged proposals

Several policy positions from the Discussion Paper remain unchanged, reflecting areas where stakeholder feedback supported the original framework:

• Interest payments: Systemic stablecoin issuers may not pay interest or other remuneration to coinholders. Any income generated from backing assets (principally UK government securities) must be retained by issuers to support scheme stability and cannot be distributed to coinholders.
• Governance and risk management: Issuers must adhere to governance and risk-management standards equivalent to other systemically important financial and market infrastructures, aligned with the PFMI. This includes sound management structures, independent oversight, comprehensive risk controls covering operational, legal, and financial exposures, and accountability of senior management.
• Operational resilience: Issuers must withstand severe but plausible disruptions and ensure continuity of critical functions (issuance, redemption, settlement), including oversight of outsourced third-party and cloud service providers. Issuers retain full regulatory responsibility for outsourced operations.
• Recovery and wind-down: Issuers must maintain credible recovery and wind-down plans demonstrating orderly continuation or transfer of critical services in distress, and must promptly notify the BOE if capital, reserves, or backing assets fall below minimum levels.
• International alignment: The regime remains anchored in internationally recognised frameworks, applying PFMI principles, and drawing on experience supervising e-money institutions, payment systems, and central counterparties.

Areas for further engagement

Transition and supervisory approach

The BOE proposes a graduated supervisory framework to manage stablecoin issuers’ transition from the FCA’s non-systemic regime to the BOE’s systemic regime under Part 5 of the Banking Act 2009. The transition should be predictable, coordinated, and proportionate.

The BOE and FCA will share information to identify firms approaching systemic scale. Once designated, issuers will become subject to the BOE’s prudential standards while continuing to comply with FCA conduct obligations. The BOE will set out formal threshold indicators (such as transaction volumes, user concentration, and payment reliance) to guide systemic recognition decisions.

Designated issuers must submit transition plans outlining compliance with prudential and operational resilience expectations. The BOE will consult further on early-warning indicators, supervisory reporting, and recovery and resolution planning, coordinating with HMT to ensure consistent designation criteria.

Innovation in wholesale markets and the Digital Securities Sandbox

The BOE emphasises the potential role of stablecoins in wholesale markets, particularly for settling transactions in tokenised securities. Current UK legislation (including retained EU Central Securities Depositories Regulation (“CSDR”)) requires securities settlement in central-bank or commercial-bank money, and so excludes stablecoins.

The BOE will use the Digital Securities Sandbox, launched jointly with the FCA and HMT, to test digital settlement assets, including stablecoins for wholesale settlement under time-limited regulatory exemptions.

The BOE will gather data on operational performance, settlement efficiency, and financial stability implications. Depending on outcomes, it may recommend recognising certain stablecoins as systemic settlement assets and amending CSDR’s definition of eligible settlement assets.

Non-sterling systemic stablecoins

The BOE explicitly addresses non-sterling stablecoins (e.g., U.S. dollar- or euro-denominated tokens) that could become systemically important in the UK. The BOE will apply its prudential principles with additional safeguards for foreign currency risks.

Issuers must hold backing assets in the same currency as the coin to eliminate exchange-rate exposure. Where backing assets are held abroad, the BOE requires legal assurances of rapid realisation and enforceable property rights in insolvency, plus cooperative arrangements with overseas authorities for crisis management.

Recognition of non-sterling systemic stablecoins will be contingent on alignment with UK financial-stability objectives and international standards.

Next steps

Responses to the Consultation Paper are required by 10 February 2026 via the BOE’s online portal. The BOE intends to publish its draft Codes of Practice later in 2026, setting out binding prudential and operational requirements for systemic stablecoin issuers.

The Consultation Paper marks a major step toward a comprehensive UK framework for digital money and payments, positioning sterling-denominated systemic stablecoins as a potentially trusted and regulated form of private money alongside commercial-bank and central-bank money.

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