UK targets end-2026 for stablecoin rules to keep pace with US

The Bank of England (BOE) is aiming to have new stablecoin regulations in place by the end of next year, as policymakers around the world battle to contain risks to financial stability from the spread of the digital money.

The UK central bank plans to launch a consultation on regulating stablecoins on Nov 10 and will favour a regime that aligns closely with US rules on bonds backing the digital assets, according to sources familiar with the matter. The BOE believes its framework will keep pace with the implementation of the US rules amid tensions over the issue between the bank and government, the sources said, asking not to be identified discussing internal deliberations.

Stablecoins, a type of cryptocurrency tied to traditional money such as the US dollar or British pound, have been a hot topic at the International Monetary Fund (IMF) and World Bank meetings in Washington this week amid rising expectations that they will transform the payments landscape. Experts believe the digital cash could unlock faster and cheaper payments. US dollar-pegged stablecoins currently dominate the market.

Global excitement over stablecoins has been fuelled by the Trump administration’s Genius Act, which has set out guidelines to normalise digital assets. One source close to the BOE’s thinking said that the US’s embrace of stablecoins had made its previous approach unsustainable.

The Financial Stability Board (FSB), which is led by BOE governor Andrew Bailey, this week warned that countries were sowing the seeds for regulatory arbitrage and potential crises by not implementing stablecoin rules in a consistent way.

One source said that UK officials planned to implement their regime by the end of 2026 and would closely align with US rules that stipulate that the backing assets must be government debt issued with a maturity of three months or less, or bonds with a remaining maturity of three months or less.

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The sources added that the BOE also plans to attract issuers by allowing a significant amount of the assets underpinning the coins to be interest-earning. That could spur demand for UK bonds and bills at a time of waning appetite in other parts of the gilt market, a hope the Trump administration holds for US Treasuries.

The UK Treasury has piled pressure on the BOE on the pace of its plans after concerns over losing ground to other jurisdictions were raised by industry experts, the sources said.

A representative for the BOE declined to comment.

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While critics say the BOE has been slow and overly cautious with its approach, UK officials believe they are ahead of the US on key aspects. That could mean the UK might implement its rules around the same time the US legislation comes into effect, or even earlier.

Katharine Braddick, head of strategic policy at Barclays and a former Treasury official, said this week in Washington that the UK would “have to move at speed” on stablecoin regulation.

“We are about to experience a period of probably swifter policy development and regulatory development and strategic policy work, certainly on the UK end,” Braddick said at an event alongside the IMF and World Bank meetings. “The US is really setting us a challenge with the pace and ambition and scope of what they are trying to achieve.”

Bailey has softened his stance to stablecoins in recent remarks after fuelling concerns with a sceptical approach.

However, the BOE governor has been privately airing his caution over the coins in Washington and met with the Bank Policy Institute, a body representing global banks, one of the sources said. Bailey’s FSB also warned this week of “significant gaps and inconsistencies that could pose risks to financial stability” in cryptoasset and stablecoin regulations globally.

Worries over the UK regime within the industry have centred on the proposed limits on stablecoin holdings – £20,000 (S$34,786) for individuals and £10 million for businesses.

BOE deputy governor Sarah Breeden said this week that the monetary authority plans to lift the limits once the threat from stablecoins causing a sudden outflow of money from bank deposits has faded. She confirmed a Bloomberg News report that exemptions to the initial caps would be made for certain large businesses. BLOOMBERG