The Bank of England has announced detailed plans to regulate new forms of digital money, marking a significant step towards modernising the UK's financial infrastructure for the future.
A New Framework for Sterling-Based Payments
This initiative aims to prepare Britain for an era where different types of money, specifically sterling-based stablecoins, are used alongside traditional cash and bank deposits. The central objective is to maintain a stable value for the wider economy by bringing these emerging payment methods under a formal regulatory umbrella.
Deputy Governor for Financial Stability, Sarah Breeden, stated that the proposals represent a pivotal step. "Our objective remains to support innovation and build trust in this emerging form of money," she said. The Bank has amended its initial proposals based on industry feedback, including clarifying how stablecoin issuers will interact with the Bank of England.
Key Requirements for Stablecoin Issuers
The proposed rules introduce strict reserve requirements for entities issuing systemic stablecoins. Under the new regime, issuers would be mandated to hold 60% of their reserves in short-term UK government bonds.
Meanwhile, the remaining 40% must be held in special accounts at the Bank of England that do not earn interest. This structure is designed to protect a substantial portion of the backing assets from market volatility and discord.
Regulatory Oversight and Next Steps
The regulatory landscape will be shared between authorities. The Financial Conduct Authority (FCA) will maintain oversight of non-systemic stablecoin operators. The Treasury will determine which entities are deemed systemic and therefore fall under the direct jurisdiction of the Bank of England.
The consultation, which focused on payment uses rather than speculative crypto trading, remains open for public feedback. Stakeholders have until 10 February 2026 to submit their responses. Further detailed guidance on the regime is expected to be outlined in 2026.
