FCA and the Bank of England set out approach to joint regulation of systemic stablecoin issuers

What Changed

• - UK stablecoin issuance will be subject to a dual regulatory regime: non‑systemic stablecoins will be supervised solely by the FCA, while systemic stablecoins used for payments will be jointly regulated by the Bank of England and FCA once recognised
• Issuing a qualifying sterling‑denominated stablecoin in the UK will become a regulated activity, requiring FCA authorisation for non‑bank issuers and bringing them within the FCA’s prudential, conduct and safeguarding rules until any systemic designa
• HM Treasury will apply statutory systemic tests under the Banking Act (e.g. scale, interconnectedness, substitutability, impact on confidence in sterling) to decide whether a stablecoin payment system or service provider is systemic, informed by advi
• Once recognised as systemic, stablecoin issuers and systemic payment system providers will fall under the Bank of England’s remit under the Banking Act 2009, including powers to obtain information, issue principles and codes of practice, require rule
• Systemic sterling‑denominated stablecoin issuers will be required to maintain backing reserves equal to all outstanding coins, with backing assets held on statutory trust in the UK and ring‑fenced from the issuer’s general estate to protect coinholde
• The Bank of England’s policy statement and draft Code of Practice propose that backing assets be held as interest‑bearing short‑term UK government debt (up to 70%) plus central bank deposits (at least 30%), with the composition calibrated to support

Suggested Considerations

• Map all existing and planned sterling‑denominated stablecoin products against the UK’s systemic and non‑systemic regimes and assess whether their intended use in UK payments could trigger HM Treasury systemic recognition.
• Initiate or update FCA authorisation applications for stablecoin issuance and cryptoasset custody activities, ensuring business models, governance and safeguarding arrangements align with CP25/14 and the forthcoming stablecoin regime.
• Design and implement reserve‑management frameworks capable of maintaining backing assets equal to outstanding coins, in the proposed 70/30 mix between short‑term UK government debt and Bank of England deposits, with appropriate stress testing and liquidity risk oversight.
• Establish statutory trust and segregation structures for backing assets and liquid‑asset reserves, including appointing UK‑authorised third‑party custodians and aligning documentation with FCA client‑asset‑style protections and coinholder proprietary claims.
• Develop capital planning processes and ICAAP‑style assessments to meet the Bank of England’s requirements for capital against general business risk and dedicated reserves for financial risk and wind‑down costs.
• For non‑UK issuers with UK‑facing sterling stablecoins, plan and implement the establishment of a licensed UK subsidiary, including governance, risk management, booking models and onshoring of backing assets to meet UK systemic regime expectations.

Key Dates

Who is Affected