In a groundbreaking announcement at the SALT conference in London, the Bank of England has revealed plans to closely collaborate with US regulators on developing a synchronized regulatory framework for stablecoins. This ambitious strategy is poised to address pressing financial stability concerns and ensure competitiveness in the digital asset landscape, with new regulations set for implementation by the end of 2026.
Bank of England and US Authorities Join Forces
On November 6, 2025, Deputy Governor Sarah Breeden made a significant announcement regarding stablecoin regulation. She confirmed that the Bank of England, alongside the UK Treasury and the US Federal Reserve, will work together to establish unified standards for stablecoins. This collaboration aims to minimize the risk of regulatory arbitrage, ensuring that no player can exploit loopholes across jurisdictions.
The urgency for this coordinated approach stems from a growing global recognition of the implications stablecoins have for the financial system. As the digital economy expands, regulators are increasingly concerned about the potential for instability posed by assets that, while pegged to stable currencies, could rapidly drain deposits from traditional banks.
Structure of the Proposed Regulatory Framework
The proposed framework includes strict measures regulating “systemic” sterling-pegged stablecoins—those expected to see widespread use for retail payments. Under this regime, individual holdings will be capped between GBP 10,000 and GBP 20,000, while businesses may hold up to GBP 10 million. Such restrictions aim to mitigate risks associated with large withdrawals from banks into digital assets.
The Bank of England’s approach focuses on ensuring that stablecoin issuers maintain high-quality asset backing, such as short-term government debt. This strategy is intended to fortify the stability of digital currencies, assisting with redemption at par value and maintaining investor confidence. The authority is also contemplating supportive measures, including a resolution framework for potential issuer failures, which could further secure the market landscape.
Addressing Industry Concerns and Motivations
While the coordination of regulations is welcomed, there are underlying tensions between regulators and industry players. Major firms, including Coinbase, have expressed concerns that ownership limits could place the UK at a competitive disadvantage, arguing that such caps are unnecessary compared to other regions where no similar restrictions exist.
Many industry stakeholders believe that while the intention behind these regulations is to protect the financial system, they could inadvertently stifle innovation and hinder the UK’s position in the surging digital asset market. If the UK’s framework is perceived as overly harsh, it risks pushing business and investment towards more accommodating jurisdictions.
Moving Towards Implementation: What’s Next?
The next crucial step comes on November 10, 2025, when the Bank of England is expected to publish a consultation paper outlining the proposed stablecoin regulations. This document will initiate a dialogue among stakeholders, providing a platform for feedback that will shape the final regulations. The ambitious goal is to implement the new framework by the end of 2026, a timeline that demands substantial collaboration across various regulators and market participants.
Regulatory observers are keen to see whether the UK will closely mirror US legislation or take a distinct approach, particularly in areas such as consumer protection and issuer authorization. As digital assets continue to evolve, the decisions made in the coming months will be pivotal in defining the future landscape of stablecoin use and regulation.
A New Era for Digital Assets
The joint effort between the Bank of England and US authorities reflects a significant shift towards more structured oversight of stablecoins, emphasizing both financial stability and market integrity. As digital currencies increasingly become part of everyday transactions, the need for a solid regulatory framework is paramount. Industry participants must stay apprised of ongoing developments, as the outcome of the upcoming consultation and subsequent regulations will shape the future of digital finance in both the UK and beyond.
