On 10 November 2025 the Bank of England published its consultation on regulating sterling-denominated stablecoins that become widely used for payments, the ones it would treat as systemic[1]. The consultation closes on 10 February 2026, and Deputy Governor Sarah Breeden described it as a step towards implementing the UK's stablecoin regime in 2026.
The design choices that matter
Two proposals stand out. First, temporary holding limits: £20,000 per coin for individuals and £10 million for businesses, with an exemptions regime for the largest firms. Second, backing assets: issuers could hold up to 60% in short-term UK government debt, with the remaining 40% held in unremunerated accounts at the Bank of England. A transition regime would allow up to 95% in short-term government debt at first for issuers moving from FCA oversight or systemic at launch.
What most commentary misses
The debate will focus on whether £20,000 is too low. The more important number for bankers is the 40%. Holding a large share of reserves at zero interest removes much of the income that makes stablecoin issuance attractive. That tilts the market towards issuers who can monetise payments, custody or distribution, and it makes bank-issued alternatives, such as tokenised deposits, relatively more competitive.
The limits, meanwhile, tell you what the Bank is worried about: a rapid migration of retail deposits into stablecoins that would reduce the funding banks use to lend. The limits are explicitly temporary, which means the question is not whether stablecoins compete with deposits, but how fast.
What to do now
Banks should run deposit outflow scenarios using the proposed limits and decide their position before the rules are final: issue, partner or compete with tokenised deposits. Payment and treasury teams should also look at the operational side. Enforcing a per-person limit across several wallets and custodians is a real engineering problem, and the firms that solve it well will be the ones regulators trust to scale.