Wholesale payments could now potentially utilize stablecoins, following the Bank of England's decision to explore their use.
The Bank of England (BoE) is embracing the potential of technological evolution, particularly in the realm of stablecoins and tokenized deposits, while maintaining a cautious and conservative approach to ensure financial stability and the integrity of money.
In a move that could trigger profound transformations in wholesale markets, the BoE is exploring the integration of both technologies into the regulated financial system. The focus is on stablecoins, digital representations of commercial bank money, recorded on programmable ledgers that enable real-time, on-chain settlement.
However, the BoE is not blind to the potential risks associated with stablecoins. It is considering limits on the holding and use of these digital assets, with proposed limits of between £10,000 and £20,000 for retail clients and up to £10 million for businesses. This is aimed at mitigating financial stability risks, such as rapid outflows from the banking sector that might reduce credit available to households and businesses.
The BoE is also concerned about the potential threat stablecoins pose to the "singleness of money"—the principle that a pound in stablecoin form should reliably equal one pound sterling. A large stablecoin losing its peg could cause significant market disruptions, particularly in government bond markets critical to financial stability.
Despite these concerns, the BoE believes that tokenized deposits can coexist and complement stablecoins, strengthening the financial system and enabling new functionalities within a safe, scalable regulatory framework. The Governor of the BoE, Andrew Bailey, has publicly warned banks against issuing stablecoins, preferring them to focus instead on tokenized deposits.
The regulation of stablecoins in the UK involves coordination between the BoE and the Financial Conduct Authority (FCA). The BoE focuses on systemic stablecoins, while the FCA takes charge of non-systemic stablecoins. This dual approach aims to prevent loopholes but could lead to complexity, especially for non-UK-issued stablecoins circulating within the UK.
The BoE plans to regulate stablecoins integrated into traditional finance carefully by setting clear holding limits and backing asset requirements, encouraging a conservative approach to issuance, and limiting stablecoins' systemic risks. It also aims to coordinate with other UK regulators like the FCA and engage with the industry for detailed consultation outcomes expected later in 2025.
This approach reflects the BoE's priority on financial stability and monetary integrity while cautiously exploring how stablecoins can support innovation and digitization of wholesale payment systems. Central bank money remains the primary settlement asset in the financial system, and the BoE is committed to ensuring that any technological evolution complements rather than undermines this foundation.
[1] Bank of England (2023). Discussion Paper on a Systemic Stablecoin Regime. [Online] Available at: https://www.bankofengland.co.uk/-/media/boe/files/discussion-paper/2023/discussion-paper-on-a-systemic-stablecoin-regime.pdf
[2] Financial Times (2023). BoE Warns Against Stablecoins, Prefers Tokenised Deposits. [Online] Available at: https://www.ft.com/content/931b98e3-58d6-401f-87f7-d9c683a4606c
[3] Bank of England (2025). Consultation Paper on a Systemic Stablecoin Regime. [Online] Available at: https://www.bankofengland.co.uk/-/media/boe/files/consultation-paper/2025/consultation-paper-on-a-systemic-stablecoin-regime.pdf
[4] Financial Conduct Authority (2024). Policy Statement on Non-Systemic Stablecoins. [Online] Available at: https://www.fca.org.uk/publications/policy-statements/policy-statement-non-systemic-stablecoins
- The Bank of England (BoE) is collaborating with technology to integrate stablecoins and tokenized deposits into the regulated financial system, aiming to foster innovation while maintaining financial stability and the integrity of money.
- In the UK, the BoE and the Financial Conduct Authority are working together to regulate stablecoins, with the BoE focusing on systemic stablecoins and the FCA overseeing non-systemic ones, ensuring a safe and scalable regulatory framework for business transactions.
