Originally published by Bank of England on 2025-11-10
The Bank of England Unveils Its Approach to Supervising Sterling Stablecoins
The Bank of England has proposed a dedicated regulatory framework for systemic sterling-denominated stablecoins, marking a turning point for digital payments in the UK. We break down the key requirements and what they mean for the market.
When the Bank of England publishes a consultation paper with a foreword from 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 view 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 come to be widely used for everyday payments could pose risks to the UK's financial stability and, as such, 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 sole supervision of the FCA. But once a stablecoin crosses into systemic territory, it enters a dual regulatory regime overseen by both the Bank of England and the FCA.
The backing requirements
The most significant 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 from the outset: when you hold a stablecoin, can you actually redeem it for its face value in fiat currency? The Bank's answer is to require precisely that: "stability of nominal 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-denominated tokens gen
Source: Bank of England