Originally published by Bank of England on 2025-11-10
Bank of England Unveils Its Vision for Supervising Pound-Backed Stablecoins
The Bank of England has proposed a dedicated regulatory regime for systemically important pound-denominated stablecoins, marking a turning point for digital payments in the United Kingdom. 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 industry takes notice. The November 2025 paper on systemic sterling-denominated stablecoins is no exception — it represents the central bank's most detailed vision yet for how digital payment tokens should be regulated in Britain.
Stablecoins as payment infrastructure
The core premise of the Bank's proposal is straightforward: stablecoins that become widely used for everyday payments could pose a risk to the UK's financial stability and therefore warrant regulation proportionate to that risk. This is not a theoretical concern. Global stablecoin transaction volumes exceeded USD 33 trillion in 2025, and the Bank is positioning itself to manage the systemic consequences before they materialize, rather than 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 solely under FCA oversight. But once a stablecoin crosses into systemic territory, it enters a dual-regulation regime supervised by both the Bank of England and the FCA.
Backing requirements
The most significant aspect of the proposal concerns how stablecoin issuers must back their tokens. The Bank proposes that systemic issuers hold portions of their backing assets in short-term UK government debt and maintain deposit accounts with the Bank of England itself. This is a highly significant development: it effectively brings 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 truly redeem it at par value in fiat currency? The Bank's answer is that precisely this is required — "par value stability, a robust legal claim, and the ability to redeem at par value in fiat currency at all times."
Implications
Source: Bank of England