The Bank of England (BoE) has unveiled its long-awaited consultation paper on stablecoin regulation, proposing a detailed framework that includes "temporary" holding limits for individuals and businesses. The measures, announced on November 10, 2025, would cap individual holdings of pound-pegged stablecoins at £20,000 (approx. $26,350) and corporate holdings at £10 million. This cautious approach aims to balance the central bank's new goal of fostering innovation with its core mandate of protecting financial stability, and notably signals a significant evolution from Governor Andrew Bailey's previous skepticism.

• The UK's central bank has laid out its plan for integrating stablecoins, but it comes with a catch for individual holders.
• Discover the specific rules for what issuers must hold in their reserves, splitting assets between the central bank and government debt.
• Learn why this move represents a major philosophical shift for the Bank of England and its famously cautious governor.

The central pillar of the Bank of England's proposal is the introduction of temporary holding limits. These caps are not intended to be permanent but are designed as a "temporary precaution" during a transitional phase. The regulator's primary concern is preventing a sudden, large-scale shift of deposits from the traditional banking system into stablecoins. Such a "bank run" in reverse could disrupt the provision of credit to the "real economy" and create a systemic shock, thereby threatening financial stability.

The paper does, however, provide for exemptions. Firms that can demonstrate a clear operational need for larger balances—such as supermarkets for payments or crypto exchanges for liquidity—can apply to hold more than the £10 million corporate limit. The Bank of England has been clear that these holding limits are a temporary measure, intended to be removed once the regulator is confident that the new stablecoin ecosystem can operate at scale without destabilizing the existing financial system.

Beyond the headline-grabbing limits, the proposal details a robust and conservative framework for how stablecoin issuers must back their tokens. This is where the Bank of England's cautious approach is most evident. The rules would require issuers of systemic stablecoins to hold 100% of their reserves in two specific asset classes:

1. 40% in non-interest-earning deposits held directly at the Bank of England itself.
2. 60% in short-term, highly liquid UK government bonds (gilts).

This two-part structure is designed for maximum public trust and redemption security. The 40% cash buffer at the central bank provides a massive, instantly available liquidity pool to meet rapid withdrawal demands, even during a market panic. The 60% in gilts allows issuers to earn some yield, but the paper stresses that these must be short-term to avoid interest rate risk. This conservative model is notably tougher than the framework seen in the U.S. GENIUS Act, which offers issuers more flexibility in their reserve composition.

This detailed, integration-focused proposal marks a significant softening of tone from the central bank, particularly from its Governor, Andrew Bailey. As recently as mid-2025, Bailey was an outspoken skeptic, advising banks to "steer clear" of stablecoins and warning that they could threaten the "very nature of money" and financial stability if not properly regulated. He viewed them primarily as a vector for bringing unregulated crypto risks into the traditional system.

While the new stablecoin regulation proposal is far from a free-for-all, its language is markedly different. Deputy Governor for Financial Stability, Sarah Breeden, stated that the framework is meant to "support innovation and build trust in this emerging form of money." She explicitly referenced a future where "stablecoins play a meaningful role in payments." This signals that the Bank of England has moved from a position of containment to one of cautious, controlled integration, a major philosophical shift.

This new stablecoin regulation framework is part of a broader, dual-pronged approach to UK crypto oversight, developed in coordination with the Financial Conduct Authority (FCA). The Bank of England will be the primary supervisor for "systemic" stablecoins—those intended for widespread use in payments and that could impact financial stability. The FCA, which is already building its own comprehensive crypto rulebook, will supervise all other, "non-systemic" stablecoins, such as those used primarily for trading within the crypto ecosystem. This clear division of labor aims to apply the right level of regulatory scrutiny to the right risk.

This entire regulatory push comes as institutional demand for digital assets reaches a fever pitch. The recent move by Morgan Stanley to open crypto fund access to its entire client base is a clear indicator of the demand that regulators are now forced to meet. This UK-specific approach also contrasts with the US, where regulators are exploring different paths, such as the SEC's proposed "innovation exemption", to manage the industry's growth.

The global race for regulatory clarity is on, and the UK's proposal is a major move. It also comes as other nations, like Indonesia, are planning their own "national stablecoin" to compete directly. The Bank of England is now accepting public feedback on its proposal until February 2026, with a final joint framework with the FCA expected later that year.

FAQs

What is the Bank of England's new stablecoin proposal?
The Bank of England (BoE) has published a consultation paper on stablecoin regulation. Its key proposal is to introduce temporary holding limits of £20,000 for individuals and £10 million for businesses on pound-pegged stablecoins to protect financial stability.

What are the proposed reserve requirements for stablecoins?
Systemic stablecoin issuers would be required to hold 100% of their reserves in very safe assets: 40% as cash in a non-interest-earning account at the Bank of England and 60% in short-term UK government bonds.

Why is this a shift in the Bank of England's stance?
Governor Andrew Bailey was previously a vocal skeptic of stablecoins, warning they could pose systemic risks. The new proposal, while cautious, is designed to "support innovation" and "build trust," signaling a significant move from containment to controlled integration.

Are these holding limits permanent?
No. The Bank of England has described the holding limits as a "temporary precaution" for a transitional period. They are intended to be removed once the regulator is confident that the stablecoin market can operate at scale without destabilizing the broader economy.

Who will regulate stablecoins in the UK?
The regulatory duties will be split. The Bank of England will supervise "systemic" stablecoins used for payments, while the Financial Conduct Authority (FCA) will supervise "non-systemic" stablecoins, such as those used primarily for crypto trading.