Stablecoin Rules Signal Faster Market Modernisation

The Bank of England is preparing to publish draft rules for systemic stablecoins in June, as policymakers move towards a year-end regulatory framework aligned with the United States timetable.

Sarah Breeden, the Bank’s deputy governor for financial stability, set out the plan at City Week 2026 in London, framing stablecoins, asset tokenisation and payment infrastructure reform as connected parts of a broader modernisation agenda. The Bank is reviewing earlier proposals after industry concerns, with officials now considering temporary limits on total stablecoin issuance rather than caps on individual holdings. The aim is to reduce compliance burdens while protecting credit supply.

Under the proposed framework, banks will be allowed to issue stablecoins only through non-deposit-taking, insolvency-remote entities. The Bank will also require distinct branding to separate stablecoins from insured bank deposits, reflecting concerns over consumer confusion and possible contagion. Breeden said the goal is a “multi-money system” in which traditional bank deposits sit alongside tokenised deposits, regulated stablecoins and potentially a retail central bank digital currency.

The Bank and the Financial Conduct Authority are also using the digital securities sandbox to support live tokenised markets. Sixteen institutions, including Euroclear, HSBC and the London Stock Exchange Group, are preparing venues and settlement systems under modified rules designed to remove legal obstacles to distributed ledger technology. The Prudential Regulation Authority has confirmed that banks’ exposures to tokenised assets will be treated like non-tokenised equivalents where legal rights and underlying risks are identical.

The programme now depends on whether regulatory caution can keep pace with infrastructure change. The Bank has launched a consultation on extending RTGS operating hours towards near-24/7 availability by the early 2030s, while a synchronisation service planned for 2028 would allow tokenised markets to settle directly against sterling central bank money.