Proposed UK rules for stablecoin issuance

January 2026

Introduction and context

As digital assets become more embedded within mainstream financial services, regulators are defining regulatory frameworks for crypto activities, and supervisory frameworks for both crypto-native and traditional finance firms who undertake them.

Stablecoins in particular have become increasingly popular. This has resulted in corresponding increased regulatory scrutiny and 2025 saw global regulators begin to develop regulation of stablecoin issuance.

In the UK, smaller, non-systemic financial services firms are regulated by the FCA alone, making them "solo-regulated," while larger, systemic firms are regulated by both the FCA and the PRA which sits within the Bank of England (BoE), making them "dual-regulated." In line with this split of regulatory responsibilities, the rules for non-systemic stablecoin issuance are to be defined by the FCA while the rules for systemic coins are to be defined by the BoE. Whether a stablecoin will be deemed systemic will be based on factors such as scale, nature of use, substitutability, interconnectedness, as well as other factors such as the firm’s branding and ambition.

Both the BoE and the FCA published their proposed rules for stablecoin issuance in the UK in 2025 and in 2026 a joint consultation is to be published outlining the detailed design of a joint regulatory framework.

This article draws out the key themes across the FCA and BoE’s proposals for stablecoin issuance from and summarises their implications.

Rules for systemic vs non-systemic stablecoin issuance

Backing assets are specific assets such as cash, government bonds, or other high-quality investments, that are held by a financial institution to back certain financial products or obligations, specifically set aside to cover particular liabilities.

To ensure stablecoins are adequately backed, both the FCA and the BoE have outlined requirements for the specific assets which issuers will be required to hold and the proportion of those assets:

	FCA	BoE
Composition of backing assets	Issuers are expected to structure their backing pool so that it contains only certain asset classes; this includes on demand deposits and government treasury debt instruments that mature in one year or less. By default, issuers’ backing asset pools must be composed of assets that are low risk, secure and sufficiently liquid; namely the following ‘core’ backing assets: i) short-term deposit* ii) UK government debt with short-dated maturities However, issuers may be permitted to hold additional asset types as part of their backing asset pools. These ‘expanded’ backing assets include: i) UK government debt with long-dated maturities ii) reverse repos iii) public debt MMFs Issuers wishing to use ‘expanded’ backing assets must notify the FCA of their intention. They will also be required to put in place appropriate backing asset risk management tools and comply with the backing assets composition ratio (BACR) – a calculation which determines the proportion of enhanced backing assets an issuer can hold *A minimum ‘floor’, known as the on-demand deposit requirement (ODDR) is to be implemented; this is a proportion of backing assets that must be held in bank deposits that are available on-demand. The ODDR is set at 5% of total backing assets.	Up to 60% of backing assets are to be held in short term sterling-denominated government debt securities while up to 40% of backing assets are to be held as deposits at the BoE – to be used to meet redemption requests Issuers that are systemic at the time of launch may be allowed to hold up to 95% of backing assets in sterling denominated UK government debt securities as they scale and this would reduce to would 60% once the coin reaches scale
Repurchase agreements	Assets or money raised by entering into a repurchase or reverse repurchase agreement that cannot be reused for other repurchase transactions or for other investments in the backing assets. Issuers are prevented from borrowing to raise funds in the backing asset pool except for where they enter into a repurchase transaction Assets, rights or money held as a counterparty to a repurchase agreement or a reverse repurchase agreement (subject to conditions as set out in CASS 16).	Systemic coin issuers are permitted to lend securities via repurchase agreements to generate liquidity but borrowing via repurchase agreements is not permitted.
Redemption	Redemption of qualifying stablecoins is to be guaranteed by the issuer at par by the end of the business day following receipt of a valid request (subject to specific exemptions).	The combined backing requirements of central bank deposits and short-dated government debt ensure that issuers hold sufficient liquid assets to meet redemption requests under both normal and stressed conditions Temporary deviations from the 40:60 split between deposits and bonds would be permitted for firms to meet large unanticipated redemption requests but must be completed on the day the request is received.

Payment systems facilitate the conversion of fiat to stablecoins and vice-versa, making them accessible for everyday transactions. Robust payment systems are essential for stablecoins to achieve widespread adoption and bridge the gap between traditional and digital finance.

FCA	BoE
No explicit requirements in relation to payment systems	Systemic issuers expected to have direct access to payments. If systemic stablecoin issuers are unable to access such payment systems directly, they may need to hold some cash balances at commercial banks strictly as a ‘float’ to facilitate redemption requests.

FCA

No explicit requirements in relation to payment systems

BoE

Systemic issuers expected to have direct access to payments. If systemic stablecoin issuers are unable to access such payment systems directly, they may need to hold some cash balances at commercial banks strictly as a ‘float’ to facilitate redemption requests.

Distributed Ledger Technology (DLT) like blockchain acting as transparent and immutable records of all transactions and ownership enable regulators to verify that stablecoins are fully backed by their stated reserves allowing stablecoins to function effectively within the financial ecosystem.

FCA

BoE

Qualifying stablecoins may be issued using all forms of DLT, including on private, public, permissioned or permissionless blockchains. However, issuers must identify and manage the risks associated with the underlying distributed ledger and make sure they can manage potential disruptions.

The use of public permissionless ledgers by systemic stablecoin issuers may be acceptable, provided they can meet the BoE’s expectations and ensure confidence and trust in money.

BoE will continue working with industry to better understand the risks and potential mitigants.

Safeguarding refers to protecting the underlying assets that back a stablecoin by ensuring they are held separately by regulated third-party custodians in high-quality, liquid forms, guaranteeing redemption even if the issuer fails. Custody, focuses on the secure storage of the digital stablecoin tokens themselves, including their cryptographic keys.

Both mechanisms are crucial for building trust, protecting consumers, and ensuring the stablecoin's integrity within the financial system.

FCA	BoE
Issuers to hold backing assets on behalf of stablecoin holders under a statutory trust, with the issuer as trustee and a fiduciary duty between the issuer and stablecoin holders. Requirement to promptly segregate backing assets on receipt, and place these with an independent third party not connected with the issuer’s group.	Qualified third parties to be appointed for safeguarding of assets other than those held by the bank Assets funded by capital and held on trust must be held onshore.

FCA

BoE

The permanent minimum requirement (PMR) sets the minimum levels of capital firms are required to hold in reserve at £150k for firms safeguarding qualifying cryptoassets and £350k for firms issuing qualifying stablecoins.

Reserves of liquid assets for financial risk and insolvency/wind down costs must be held on statutory trust for the benefit of holders and insolvency practitioners

Capital is set as the higher of either the cost of recovery from the largest plausible loss event or six months of operating expenses

Capital should be in paid up capital, share premium, retained earnings and disclosed reserves (largely in line with Common Equity Tier 1 (CET1) capital).

Assets funded by capital must be high quality and sufficiently liquid for the risks they intend to mitigate.

Holding limits are limitations on the amount of currency which may be held by a single individual or entity. These may be imposed to ensure the stability of a currency.

FCA	BoE
None proposed in CP25/14	£20,000 for individuals, £10 million for businesses – to be loosened/removed once BoE is comfortable that risks to provision of credit by the banking sector have been understood and mitigated.

Both regulators expect that systemic coins should not be used as an investment – interest should not be paid to holders.

Implications and next steps

The proposals align with the UK’s low appetite for a significant shift away from settlement in central bank money towards settlement in privately issued money. Systemic issuance comes with heightened requirements and regulatory scrutiny for firms. Redemption, in particular, represents a new market practice for which providers will be required to build out systems and procedures which outline key processes such as performance of stress testing.

Firms should familiarise themselves with the requirements and review business models/strategy in light of the proposed rules.

Firms should also review the joint FCA/BoE consultation when it is published as it is likely to provide additional clarity, particularly for firms who do not intend to issue systemic coins at inception but may wish to ramp up to systemic levels eventually.

Prospective UK stablecoin issuers may wish to apply to the FCA’s Regulatory Sandbox which provides a space for participating firms to test products, get support, and help shape future regulation.