Bank of England and FCA publish new framework shaping UK stablecoin regulation

Today, 30 June, the Bank of England and the UK’s Financial Conduct Authority (FCA) published a paper outlining a joint regulatory framework for UK stablecoins. 

This follows a House of Lords report released early this month, warning that the UK risks falling behind global counterparts in stablecoin issuance if it doesn’t loosen existing regulatory proposals. 

The new document, which serves as a consultation paper, provides a detailed roadmap on how the two bodies will share supervisory responsibilities over GBP-backed stablecoins. It outlines stablecoin oversight as an integrated, two-tiered regime: non-systemic stablecoins, regulated only by FCA; and systemic stablecoins, jointly regulated by both entities. 

While FCA’s oversight applies to all UK-issued stablecoins and officially begins on 25 October 2027, joint regulation will only take effect once an issuer is deemed ‘systemic’ by the HM Treasury, meaning the issuer is so widely used that it could “threaten the stability of, or confidence in, the UK financial system.” 

FCA’s rules consider consumer protection, whereas the Bank’s focus is strictly on mitigating systemic risks and ensuring stablecoins serve solely as money at scale. A stablecoin could morph into a threat if it becomes integrated into a country’s everyday commerce, as the technology behind it remains exposed to cyberattacks or sudden failures.

HM Treasury designates an issuer as ‘systemic’ by working with the Bank in identifying volumes and values of transactions, as well as its use cases. According to the recent framework, issuers anticipated to reach large scales can be deemed systemic at launch (SaL).

The new document also provides a phased onboarding approach for issuers transitioning from solo FCA regulation to joint regulation, targeting secure growth. This is outlined as: risk assessment, mobilisation, scaling (seeking to help issuers adapt to the more rigorous regulations of the joint oversight), and baseline supervision – the stage at which an issuer fully adheres to both bodies’ rules.

According to the paper, when launching systemic sterling-denominated stablecoins, overseas issuers are mandated to establish a legal presence in the UK. For stablecoins pegged to foreign currencies, the Bank may refer to the home country’s domestic regulation – provided the currency is of a country with clear guidelines for stablecoins and a cooperative cross-border relationship with the UK. 

Recent developments boosting flexibility

FCA and Bank of England require that sterling-denominated stablecoins are pegged 1:1 to the currency. This makes sure stablecoins are able to be safely redeemed as their pegged value.

While the House of Lords report published in early June supported this approach, it asked the Bank to reconsider its mandate for 40% of the backing to be held in unremunerated (meaning they earn 0% interest) central bank accounts. 

The requirement, according to the report, risked the global competitiveness of UK stablecoins, as it could deter their business viability. 

A policy statement published by the Bank of England last week decreased this mandate to 30%. As a result, companies are now able to capture significantly more interest, making stablecoins a much more attractive business tool. 

The House of Lords report had also noted that regulation shouldn’t centre specific use cases for the coin, opening up opportunities for novel use cases. The new joint approach, differentiating oversight as systemic and non-systemic issuers according to scale, enables space for smaller, niche issuers to operate without overwhelming regulatory scrutiny. 

At the moment, 99% of all stablecoins are pegged to the US dollar, enabled largely through regulatory clarity provided by the US GENIUS Act. 

The recent paper by Bank of England and FCA is seeking feedback, and the consultation period is due to close on 30 September 2026.