UK regulators detail phased oversight approach for systemic stablecoins in landmark move

The Bank of England and the Financial Conduct Authority have set out how they plan to divide oversight of systemic stablecoin issuers, as the UK moves closer to putting a formal regime in place for digital money that could be used for payments and settlement.

The joint approach document builds on the Bank’s policy statement and draft Code of Practice for sterling-denominated systemic stablecoins, alongside the FCA’s final rules for non-systemic stablecoins. Together, the publications are intended to create a clearer pathway for firms that begin under FCA supervision and later grow large enough to be deemed systemic, as well as for firms that are recognised as systemic from the outset.

A central theme is regulatory alignment where possible, while still reflecting the different statutory duties of the two authorities. The Bank and the FCA said they had tried to avoid unnecessary duplication and to make the transition between regimes more predictable for issuers whose scale or growth may bring them into the systemic category.

Under the framework, the FCA would act as the lead authority across a wide range of conduct and market-integrity matters, including consumer protection, complaints, financial crime, market abuse, whistleblowing and senior managers’ accountability. In areas such as operational resilience, governance, record-keeping, reporting and redemption, both regulators would have a role. The Bank would lead on backing assets, capital and reserve requirements, safeguarding, failure arrangements and temporary issuance limits.

The document also addresses how supervision would work where a stablecoin issuer sits within the remit of more than one regulator. In those cases, the Bank and FCA said they would coordinate with one another, and with other authorities such as the Prudential Regulation Authority or Payment Systems Regulator where relevant, on a case-by-case basis.

Particular attention is being paid to firms that could move from sole FCA regulation to joint regulation after recognition as systemic by HM Treasury. The Bank said it expects to use transitional arrangements to avoid forcing such firms to meet all of its requirements immediately upon recognition. Instead, it envisages transition plans lasting typically between 12 and 36 months, with the precise timetable depending on factors such as the firm’s growth, the potential risk to UK financial stability and the complexity of the obligations involved.

For firms recognised as systemic at launch, the approach is different but follows a similar philosophy. The Bank said it would expect such issuers to go through its mobilisation process, with tailored supervisory requirements and de minimis operational limits set according to risk. These firms would also need to be authorised by the FCA before carrying out regulated activities. The FCA said the authorisation process can take up to six months for complete applications, and up to a year if applications are incomplete.

The Bank is also proposing a “step-up” route for systemic-at-launch firms, allowing them to hold up to 95% of backing assets in short-term sterling-denominated UK government debt securities, with the remaining 5% held in unremunerated central bank deposits during an initial phase. Over time, those firms would need to move to the Bank’s full backing-asset mix of 30% central bank deposits and 70% short-term UK government debt securities before reaching baseline supervision.

The consultation reflects the wider effort by UK regulators to support the use of stablecoins in a controlled environment. The Bank said it aims to help firms scale safely while preserving confidence in money and limiting risks to financial stability. The broader ambition remains for regulated stablecoins to operate in the UK from 2027.

The joint approach document is open for comment until 30 September 2026. The Bank said it may publish further guidance after the consultation, including updates to its supervisory approach and its memorandum of understanding with the FCA, the PRA and the PSR. The two regulators may also issue additional joint material to clarify overlapping requirements once the Bank finalises its rules.

The latest publication comes shortly after the Bank updated its digital securities sandbox guidance to allow certain stablecoins to be used for securities settlement, subject to further communication and possible legislative changes. That move suggests the authorities are increasingly preparing the infrastructure that would allow stablecoins to play a wider role in the UK financial system, even as they continue to stress the need for prudential safeguards and close supervision.