Strangely Beautiful: Bank of England Consultation (Nov 10) for Stablecoins

The Bank of England’s consultation on regulating stablecoins of November 10, 2025, is strangely beautiful. The consultation demonstrates remarkable intellectual honesty and:

1. Questions its own sacred cows - including exclusive access to BoE accounts and the agent model - the PayPal-Barclays example is telling - PayPal's market cap approaches Barclays itself, yet operates through them for Faster Payments
2. Thinking is in ecosystems, not silos - The "multi-money mixed ecosystem" acknowledges digital and physical money will coexist, not compete
3. Being pragmatic about unknowns - The DLT section is refreshingly honest about permissionless ledgers and settlement risk without defaulting to prohibition

Framework: Sensible Risk-tiered regulation:

Systemic issuers               →        Bank + FCA + HMT.

Non-systemic issuers        →        Lighter touch.

Flexible and clear requirements

The 40% BoE reserve requirement is the anchor ensuring stablecoins have a direct link to central bank money while allowing flexibility. The step-up to 95% UK debt for systemic issuers at launch can address bootstrapping problems.

No interest to coin holders is philosophically important - it keeps stablecoins as payment instruments, not savings products. Revenue from payment efficiency, not yield arbitrage.

The timeline (H1 2026 policy, H2 2026 rules) is aggressive but achievable.

Digital finance

The consultation paper shows the potential of how a central bank in an era where "money" fragments into multiple forms can reinforce trust. The custodial wallet provisions, the £20k individual/£10m business limits, the interoperability focus show serious engagement with how people and businesses are able to use these tools.

The UK is creating one of the more thoughtful, adaptive stablecoin regimes globally. Potentially significant for London's competitive position in digital finance as wallets can hold a portfolio of tokens, including stablecoins, that can be accessed at any time. By looking at the emergence of the future blend of different types of digital and physical money is the future global blueprint for Digital Finance.

This consultation is significantly larger than Stablecoin and deserves our attention.

Appendix: Details: Proposed Regime Key highlights

The approach of reflecting where the Bank was on this topic compared to where it is now is the magic. The comparison is open, honest and insightful. There are no sacred topics such as the exclusiveness of a Bank of England bank account or the use of agents to access Payments Services e.g. PayPal (market Cap £49 billion) uses Barclays (£59 billion) for Faster Payments.

Regime Structure - Given digital ‘at par pegged to an actual currency’ - Stablecoins and Tokens - there are three key parties involved: Bank of England (Bank), Financial Conduct Agency (FCA) and His Majesty’s Treasury (HMT).

The choice of party(s) is based on the level of risk to the payment infrastructure. If its systemic then the Bank will recommend the stablecoin/token issuer to HMT. If HMT agrees would be recognised as a payment system or service provider and jointly regulated by Bank and FCA.

Coin/Token Usage

Individuals per coin limited £20,000, retail businesses £10 million limited. Potential exceptions where business require higher limits such as large supply chain companies.

Financial Market Infrastructures (FMIs) under current laws cannot be used so Bank and FCA will use regulated sterling and non-sterling stablecoins. Changes in regulations for wholesale markets in central securities maybe required.  The use of stablecoin is subject to the risk management parties involved. Stablecoin used as a settlement for crypto assets is seen by Financial Policy Committee as limited and not systemic.

Timeframe: By H1 2026 Bank Policy Statement and rules and agreed Bank-FCA approach to joint regulation. Final Bank rules and supervisory H2. 2026.

Backing Assets: At least 40% of the backing assets to be held at the Bank. The reminder held in short-term sterling UK government securities. Issuers are to use repurchase agreements to generate liquidity. Step-up regime, Issuers recognised by HMT as systemic could be allowed to hold up 95% UK debt at launch. Systemic issuers will be allowed to receive a yield on up to 60% from the UK securities with, at least 40% unremunerated.

All debt to be short-term maturity, like emerging regimes internationally, under one year. Bank considers issuers should not pay interest to coin holder. Issuers revenue should focus on payment and activities that drive efficiency, cost reduction and enhanced functionality.

Direct Access to Payment Systems

Proposed on and off-ramping and payment flows from bank accounts to stablecoin accounts for frictionless settlement in central bank money.

Capital and Reserves

A risk-based approach to reflect each issuer’s business profile and use existing international standards (i.e. PFMI). General business risk capital should cover risks systemic issuers may face during normal business activities. Proposed 6 months of operating expenses or cost of largest plausible event. Capital comprised like CET1 capital instruments. Also, two trust reserves of liquid assets in event of failure. Illustration of cost: Issuer with 60% of UK debt with 93 days remaining maturity the reserve for financial risk amounts to 0.46% of total backing assets.

Custodial Wallet provides services to multiple payments or stablecoin issuers is recognise by HMT as a service provider. Bank will recommend to HMT, through value and volume-based metrics who needs to be reviewed. Custodian wallets have a crucial role in the payment chain, supporting both digital and tokenised deposits. The custodian wallet provider must follow FCA rules.

Mixed Payment Ecosystem: Bank recognises and supports the transformation potential of technology associated with stablecoin/tokens and the role non-bank entities play in a mixed payments ecosystem. Transformation needs to be managed to insure an orderly transition to this new mixed payment era.

Distributed Ledger Technology (DLT) can be permissioned and permissionless and no single entity is responsible for assessing the risks of the payment chain. The Bank is open to that risk and solutions to reduce risk.  It is not absolute these ledgers provide a clear accountability and could result in final settlement risk again the Bank is open to solutions.

Interoperability: the future is seen as a ‘multi-money’ mixed ecosystem. The UK retail payment landscape is undergoing a transformation via the National Payment Vision and interoperation is key.