The Bank of England is advancing new regulations for UK stablecoins and tokenized finance to modernize payment systems. Deputy Governor Sarah Breeden stated these digital currencies could operate alongside traditional money, improving speed and efficiency. However, digital asset firms have warned that proposed strict caps and reserve requirements may slow market adoption.
The Bank of England is preparing new rules for UK stablecoins to strengthen its digital payments agenda. Deputy Governor Sarah Breeden said regulated digital money could operate beside existing systems.
Speaking at City Week 2026, Breeden said tokenized finance could make payments faster and more efficient. She said shared digital ledgers and smart contracts could reduce delays by automating payment and settlement.
The central bank is collaborating with the Financial Conduct Authority on future payment systems. This includes regulations for stablecoins and tokenized deposits in the UK.
Regulators are seeking greater competition in payments for consumers. UK stablecoins could be used for day-to-day purchases alongside traditional bank money.
The bank plans to publish draft rules for systemic UK stablecoins next month. It aims to complete the framework later this year after considering feedback.
An earlier proposal included a cap of approximately $25,000 on holdings of any one sterling stablecoin. Digital asset firms criticized this, claiming stringent restrictions would hinder adoption.
Reserve rules are another major concern under the previous proposals. Issuers would be required to hold a minimum of 40% of reserves in interest-free central bank deposits.
Crypto companies stated such conditions may affect market strengthening. Financial institutions are less interested in strict reserve rules and more in compliance, interoperability, and more efficient settlement systems, said Marcos Viriato.
The bank is also building tokenized finance infrastructure in wholesale markets. Sixteen companies including London Stock Exchange Group and HSBC will offer tokenized trading in the UK’s Digital Securities Sandbox.
Officials plan to shift settlement hours to near 24 hours over coming years. By 2027, the bank intends to directly link to tokenized asset networks.
