Bank of England to Regulate Systemic Stablecoins as Money

The Bank of England will open for applications by the end of the year from firms seeking to issue stablecoins that are widely used for payments and could pose risks to U.K. financial stability. The central bank said those stablecoins will be treated as a new form of money and will face central-bank supervision and resilience standards.

Sasha Mills, the Bank’s executive director for financial market infrastructure, told a financial summit the BoE will welcome applications by year-end and is preparing to assess issuers seeking to operate systemic stablecoins in the U.K. She said regulators are not trying to pick between tokenized deposits and stablecoins and that policy makers do not yet know which instruments best serve specific payment needs. Mills added that stablecoins must match the robustness required of other forms of money so users can choose between tokenized deposits, stablecoins and electronic money in an interoperable way.

The Bank defined systemic stablecoins as tokens that become widely used for retail or corporate payments and therefore may pose risks to U.K. financial stability. Stablecoin projects that do not reach that scale will remain under the Financial Conduct Authority’s supervision. The FCA has already launched a regulatory sandbox for stablecoin products and selected four firms to participate: Revolut, Monee Financial Technologies, ReStabilise and VVTX.

Matthew Long, the FCA’s director for payments and digital assets, said the sandbox will inform how the regulator shapes rules and supports firms launching stablecoins. “We’ve created a regime where we could have a trusted, redeemable stablecoin, which we’re proud to stand behind,” he said, adding that the regulator expects industry to meet the standards the regime sets.

The BoE said it will apply legal, operational and prudential standards intended to ensure systemic stablecoins meet the same resilience and legal expectations as other monies used in the U.K. payments system. Mills said the Bank aims to set interoperability expectations so different forms of digital money can work together for end users.

Officials noted the international context for stablecoin regulation. Mills pointed out that roughly 99% of the global stablecoin market is denominated in U.S. dollars and that many existing dollar-denominated tokens were created before recent U.S. legislative proposals, meaning they may not align with new U.S. rules. The Bank characterized its timeline for opening applications as placing the U.K. in a similar position to other major jurisdictions, with a full regulatory package for systemic stablecoins expected by year-end.

The split in regulatory responsibility-Bank of England oversight for widely used, systemic stablecoins and FCA oversight for less widely used tokens-creates a two-tier framework. Regulators said the framework intends to protect consumers and financial stability while allowing industry participants to compete, provided they meet legal, operational and prudential requirements.