UK Systemic Stablecoin Implementation - finally going Further and Faster?
27 October 2025
Max Savoie and Simon Williams provide an update
Key takeaways:
- Softened Bank of England stablecoins stance
- Increased UK regulatory cadence
- Systemic stablecoins: those used for retail money or for wholesale 'real world' payments
- UK stablecoin holdings limits remain, for now
- Challenges as international progress accelerates
- Consultation paper reportedly launching 10 November 2025, with regulation finalised in 2026
Softened stance
The Bank of England's somewhat frosty view of stablecoins has been softening. The thaw gathered pace with Sarah Breeden's 3 September 2025 speech (our take here) and then Governor Andrew Bailey's 1 October 2025 FT article.
With Sasha Mills' 8 October 2025 and Sarah Breeden's 15 October 2025 speeches, the Bank of England's 15 October 2025 progress update, and Victoria Cleland's 21 October 2025 speech, the thaw continues.
Although the UK's enabling legislation was enacted in 2023, and the regulatory consultation started nearly two years ago, we are finally starting to see more detail of the UK's systemic stablecoin regime.
Systemic stablecoins
The Bank of England's priority is to maintain trust and confidence in money and payments. In particular to preserve the 'singleness' of money, so that a UK pound is interchangeable without loss, and is always worth one pound whoever the issuer.
The UK central bank will regulate stablecoins used in systemic payment systems. That is, stablecoins widely used as money in retail and in wholesale 'real world' payments. Systemic stablecoins will not (currently) include stablecoins used as settlement assets for unbacked cryptoassets.
To mitigate the cross-contagion risk of backing assets being held with commercial banks, systemic stablecoin issuers will be able to hold backing assets in central bank accounts. Stablecoin backing assets should be risk-free, albeit that a proportion will now be permitted to earn some return by holdings of short-term UK government debt. Andrew Bailey has suggested a stablecoin insurance scheme and there are also to be regulatory proposals for stablecoins in extremis.
Finally, despite vocal lobbying by industry, the Bank of England intends to retain – for now – limits for a user's holdings of systemic stablecoins. The limits are intended to be temporary, to ensure financial stability whilst the economy adjusts to the new payment rails.
International ambition, domestic cadence
Digital assets are 'everywhere and nowhere', and the UK is far from alone in seeking to make its jurisdiction the DLT destination of choice, whilst attempting to balance this aspiration with regulatory policy.
The European Union is very mindful of international challenges to the Euro, for example the recent comments by the European Central Bank (here) and the Banque de France (here and here). The international ambition and gravitational pull of the USA are undoubted (our recent update here), and notably the UK has established a digital assets taskforce with the USA.
Domestically, a former Chancellor of the Exchequer warned the UK not to be left behind. Imperial Business School, London has called for the regulatory framework to be accelerated. Ashurst urged the regulation to go further and faster.
As a counterpoint, the Financial Stability Board (now Chaired by Bank of England Governor Andrew Bailey) in its 16 October 2025 review found significant gaps and inconsistencies in implementation of crypto and stablecoin recommendations.
There is no doubt that these Bank of England announcements are intended to meet concerns about its digital assets regulatory pace and international ambition.
What's next?
McKinsey's 2025 Global Payments Report reminds us of the importance of the payments sector:
"…the payments industry remains the most valuable part of financial services, generating $2.5 trillion in revenue from $2.0 quadrillion in value flows, supported by 3.6 trillion transactions worldwide."
And there is no doubt about the UK Government's ambitions for the financial services sector as an engine for economic growth.
However it is important not to overinterpret the softened stablecoins stance. The Bank of England is at pains to stress the importance of financial stability, and some of its proposals could go to the economics of a stablecoin issue and impact the UK’s attractiveness as a stablecoin jurisdiction. There is obviously a balance to be found between regulatory policy and the Government's push for financial services economic growth.
We look forward to the Bank of England’s detailed systemic stablecoin proposals. The consultation is reportedly launching on 10 November 2025, aiming for regulation to be finalised in 2026.
