Originally published by Bank of England on 2025-11-10
The Bank of England Outlines Its Approach to Supervising Sterling Stablecoins
The Bank of England has proposed a dedicated regulatory framework for systemic sterling-denominated stablecoins, marking a pivotal moment for digital payments in the UK. We examine the key requirements and what they mean for the market.
When the Bank of England publishes a consultation paper with a foreword by Governor Andrew Bailey, the financial services sector pays attention. The November 2025 paper on systemic sterling-denominated stablecoins is no exception: it represents the central bank's most detailed vision to date on how digital payment tokens should be regulated in the UK.
Stablecoins as payment infrastructure
The central premise of the Bank's proposal is straightforward: stablecoins that become widely used for everyday payments could pose risks to the UK's financial stability and therefore require regulation proportionate to that risk. This is not a theoretical concern. Global stablecoin transaction volume exceeded $33 trillion in 2025, and the Bank is positioning itself to manage the systemic implications before they materialize, not after.
What sets this proposal apart from earlier regulatory approaches is its focus on the "systemic" threshold. Non-systemic stablecoins—those not yet widely adopted for payments—remain under the FCA's sole supervision. But once a stablecoin crosses into systemic territory, it enters a dual-regulation regime overseen by both the Bank of England and the FCA.
The backing requirements
The most far-reaching aspect of the proposal concerns how stablecoin issuers must back their tokens. The Bank proposes that systemic issuers hold part of their backing assets in short-term UK government debt and maintain deposit accounts at the Bank of England itself. This is a notable development: it effectively integrates stablecoin issuers into the same financial infrastructure that underpins traditional banking.
For users, this matters because it addresses the fundamental question that has shadowed the stablecoin market since its earliest days: when you hold a stablecoin, can you genuinely redeem it for its face value in fiat currency? The Bank's response is to require exactly that: "stability of par value, a robust legal right, and the ability to always redeem at par in fiat currency."
Implications for the UK digital payments landscape
The practical implications extend well beyond stablecoin issuers themselves. If the framework succeeds in creating sterling tokens gen
Source: Bank of England