Executive Summary
- What’s new: The Bank of England and UK Financial Conduct Authority have published policy statements outlining the UK’s plans for regulating stablecoins.
- Why it matters: The UK is establishing a two-tier approach for systemic and nonsystemic stablecoins, with enhanced regulation for systemic stablecoins.
- What to do next: Issuers will need to establish a framework for securing and safeguarding backing assets, enabling timely redemption and restricting remuneration and to demonstrate transparency through specific disclosure and a market abuse regime.
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The UK’s Regime Takes Shape
Over the course of June 2025, both the Bank of England (BoE) and the UK Financial Conduct Authority (FCA) published policy statements setting out the UK’s framework for regulating stablecoins. These policy statements followed a period of consultation, during which both regulators adapted their proposals amid significant feedback from a broad spectrum of stakeholders across the industry. While the UK’s regulators have shifted a number of positions over the last twelve months, questions remain regarding how the UK regime compares to other financial centres.
The progress seen in the UK follows the EU’s adoption of Regulation (EU) 2023/1114, the Markets in Crypto-Assets Regulation (MiCA), in May 2023 and the US’s Guiding and Establishing National Innovation for US Stablecoins Act (the GENIUS Act).
Key Components of the UK’s Stablecoin Framework
The BoE’s and FCA’s approach broadly focusses on the areas outlined below, including the backing asset regime, prudential requirements, redemption process, safeguarding, remuneration and disclosure requirements (among other things). Whether a stablecoin falls under the FCA’s framework or the more onerous BoE regime will depend on whether the stablecoin is classed as “systemic.”
Systemic Versus Nonsystemic
The FCA’s regime will apply to nonsystemic UK-issued qualifying stablecoins, and the BoE’s proposals will apply to stablecoins that HM Treasury determines are systemic (with the advice of the BoE). The BoE’s regime is intended, broadly, to cover stablecoins widely used in payments that may pose risks to UK financial stability. While the BoE has set out qualitative criteria, the bank has so far resisted providing specific quantitative thresholds to define in-scope stablecoins.
To the extent a stablecoin falls within the BoE’s regime, the stablecoin will be subject to enhanced requirements which, in addition to those outlined below, include an initial maximum issuance limit of £40 billion (referred to as the “temporary issuance guardrail”). Ultimately the BoE expects to relax and remove the guardrail over time once the bank is satisfied that the risks to credit provision posed by stablecoins has been effectively mitigated.
While the guardrail is a UK concept, the notion of enhanced regulation for systemic stablecoins is not unique. The EU’s regime, for example, requires the European Banking Authority (rather than member states) to supervise “significant” tokens. Similarly, in the US, state-qualified issuers with stablecoins in excess of $10 billion will be required to transition to federal regulation.
Backing Assets
The UK’s regime maintains the principle that stablecoins should be backed by a pool of assets on a one-for-one basis, with the composition of the backing asset pool varying depending on whether the stablecoin is classed as systemic.
The FCA’s regime for nonsystemic stablecoins permits the backing asset pool to be comprised of short-term treasury debt instruments (including debt issued by full members of the OECD) and cash deposits, with the possibility to expand the scope of assets to include longer-term government debt, units in public debt CNAV money market funds and assets held as a counterparty to repurchase or reverse repurchase agreements. Underpinning the FCA’s proposals is a requirement to retain not less than 5% of the pool in on-demand UK bank deposits.
While the BoE’s position has softened over time, the bank has maintained a more restrictive approach for systemic stablecoins, requiring 70% of the backing asset pool to comprise short-term UK government debt securities, with the remaining 30% of the pool to comprise unremunerated central bank deposits. Recognising the gulf with the FCA’s position, the BoE clarified that it will afford issuers a transitionary period as they move between regimes.
In contrast to the BoE’s position, the US GENIUS Act envisages that backing assets will comprise a combination of cash, demand deposits, short-term US Treasury bills and other high-quality short-duration assets. Meanwhile, the EU’s MiCA permits 70% of the backing asset pool to comprise low-risk, highly liquid financial instruments (as prescribed by the European Banking Authority), with the remaining 30% to be deposited with credit institutions.
Prudential Requirements
In addition to maintaining a backing asset pool, issuers would also be subject to prudential requirements under both the FCA and BoE regimes. Specifically, the FCA set a regulatory capital requirement of 1% of the average value of issued stablecoins, while the BoE intends to apply existing international standards as a baseline for the bank’s capital requirements, including reserves for general business risks, financial risk and insolvency/wind-down.
US regulators have similarly been directed to impose capital, liquidity and risk-management requirements on permitted payment stablecoin issuers (with customisation based on business model and risk profile), and MiCA sets the EU’s variable regulatory capital requirement at 2% of the total value of the relevant stablecoin in circulation.
Redemption
All stablecoins subject to the UK regime must come with a direct right to redeem for money at par value (a principle shared both in the GENIUS Act and MiCA). UK regulators therefore require that redemption fees (if any) be commensurate with costs and not serve as a barrier to redemption. In addition, issuers must complete redemption requests by the end of the next business day (under the FCA regime) or within 24 hours (under the BoE regime), subject to completing customer due diligence. The US opted for a less prescriptive approach, requiring redemptions to occur “in a timely manner.”
Safeguarding
UK regulators maintain that safeguarded backing assets must be segregated and held under a statutory trust, ensuring the trustee is subject to fiduciary duties and acting in the best interests of beneficiaries. While the BoE permits the use of appropriately qualified custodians within an issuer’s group, the FCA has limited the use of intragroup custodians to 20% of the value of the backing asset pool, although an exemption applies where the issuer can show that compliance with the 20% limit would be disproportionate considering the low value of the backing asset pool; the nature, scale and complexity of the issuer’s business; and the safety offered by the third-party custodians.
While the EU also requires funds to be safeguarded, MiCA ultimately applies the safeguarding standards applicable to traditional electronic money (the details of which are determined at a member state level). The GENIUS Act contains a commingling prohibition that requires payment stablecoin reserves, payment stablecoins, cash and other property of an in-scope issuer or customer to be separately accounted for and segregated from other assets, though an exception allows for the commingling of these assets in the form of an omnibus account at an insured depository institution.
Remuneration
Globally, jurisdictions have broadly aligned on the principle that there should be no payment of interest or yields to coinholders, given stablecoins are not being treated as investments or deposit-like instruments. In the UK specifically, regulators have clarified that this restriction is not directed at activity-based rewards (e.g., rewards earned through and conditioned on the use of the relevant stablecoin for payments).
Disclosure
Issuers subject to the UK regime will be required to publish certain information online, including related to, among other things: (i) the stablecoin’s underlying technology, (ii) the redemption process (including fees), (iii) the value of backing assets, together with (iv) a qualifying cryptoasset disclosure document. The UK is also implementing a Market Abuse Regime for Cryptoassets (MARC) requiring timely disclosure of inside information and prohibiting behaviours such as insider dealing, unlawful disclosure of inside information and market manipulation.
Similarly, in the EU, issuers are required to publish a cryptoasset white paper setting out details about, among other things: (i) the issuer, (ii) the token, (iii) the underlying technology, (iv) risk factors and (v) compliance with a broad scope of marketing requirements to ensure communications are fair, clear, not misleading and consistent with the relevant white paper.
Under the GENIUS Act, a permitted payment stablecoin issuer must publish annual, audited financial statements on its website and submit those statements to its primary US regulator. The issuer is required to clearly and publicly disclose its redemption policy and any fees associated with the purchase or redemption of stablecoins and must also publish the monthly composition of its reserves on its website. US regulators also announced an obligation under the GENIUS Act that would require permitted payment stablecoin issuers to submit a confidential weekly report that collects standardised daily information on stablecoin issuance, reserve assets, stablecoin ownership concentration and trading activity. These issuers will also be required to submit information about their income, balance sheet assets and liabilities, off-balance-sheet activities and capital on a quarterly basis.
What’s Next for the UK’s Regime?
Now that the BoE and FCA have published their policy statements, the UK’s implementation of a stablecoin regime is entering the final phase.
- The BoE’s policy statement is open for consultation until 22 September 2026, and the BoE plans to implement final rules in 2027.
- The FCA’s regime for nonsystemic stablecoins is due to come into force on 25 October 2027, with the FCA application period opening on 30 September 2026.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.