Systemic stablecoins are the focus of a new Bank of England consultation that outlines backing, holding limits and liquidity arrangements for sterling-denominated stablecoins aimed at protecting consumers and financial stability.
Summary
How does the Bank of England consultation propose using government debt as backing for systemic stablecoins?
The proposal allows up to 60% backing in short-term UK government debt for operational issuance, rising to 95% for a systemic-at-launch scenario. In addition, the consultation notes the remaining backing could be held as deposits in unremunerated accounts at the Bank of England, representing roughly 40% of the mix in some designs. This combination is intended to balance liquidity and credit quality while limiting exposure to private-sector assets.
As a result, issuers would need clearer rules on eligible securities and custody. However, the consultation paper also signals joint work with the FCA; see the BoE consultation paper for full detail, where operational requirements and legal interfaces are set out for industry scrutiny.
Operational safeguards and custody questions 60% backing in short-term UK government debt for operational issuance, rising to 95% for a systemic-at-launch scenario. In addition, issuers must address settlement speed, custody resilience, and eligible short-term gilts. In practice, firms should adopt multi-vendor custody, routine reconciliation and pre-positioned liquidity facilities to reduce settlement latency and contagion risk. It should be noted that specifics on haircuts and precise eligibility remain for future guidance, and will include interactions with fiscal frameworks and market infrastructure.
What are the proposed systemic stablecoins holding limits and FCA stablecoin supervision?
The draft sets holding limits of £20,000 per coin for individuals and £10 million for businesses, while permitting exemptions in specified commercial contexts. Consequently, retail protection and commercial thresholds are distinct, and the consultation clarifies how exemptions would operate in practice to preserve market utility for legitimate business uses.
In addition, the paper makes clear that non-systemic stablecoins used as assets in crypto markets remain under FCA supervision, not this regime. Sarah Breeden, Deputy Governor for Financial Stability, emphasised that the proposals aim to support innovation while prioritising operational resilience and consumer protection.
How will central bank liquidity arrangements support systemic stablecoins and Payments Vision Delivery Committee alignment?
Central bank liquidity arrangements are proposed to backstop systemic failures, with operational detail to be consulted on with industry. Moreover, the approach aims to align with the Payments Vision Delivery Committee to support resilience across sterling payment flows and to reduce settlement frictions across the system.
The Bank of England expects to publish a joint approach document with the FCA in 2026 and the consultation is open until 10 February 2026. These steps aim to ensure coordinated policy and operational readiness, while leaving technical rule-making to follow after industry feedback.
Note: the framework references recognition and wider fiscal interfaces; HM Treasury remains central to fiscal and legal arrangements affecting recognition and backing of any sovereign-linked stablecoin proposals; see the HM Treasury recognition framework for overlapping work.
Overall, the consultation balances market utility with financial stability, proposing robust and critical safeguards while leaving technical details for further industry responses and subsequent rule-making. That said, industry feedback will shape final regulatory form.
