Innovate Finance and our Digital Pound Foundation have produced a detailed response to the Bank of England's recent consultation on proposals for stablecoin regulation (November 2025 Bank of England Consultation: Proposed regulatory regime for sterling-denominated systemic stablecoins). 

This has drawn on the views of our membership and Digital Pound Foundation, which includes: global stablecoin issuers, UK based start-up GBP stablecoin issuers, payment service providers and challenger banks who collectively represent the GBP stablecoin ecosystem.  The unanimous view across this group is that the proposals in the consultation paper contain a number of significant elements that will prevent a successful  UK GBP stablecoin from being launched. We have identified the top priority issues for the GBP stablecoin ecosystem and we have set out alternative approaches and proposals for each area, to identify how relevant stability risks can be addressed. In summary these are:

• Holding limits for users: As a ‘transitional measure’ they will prove operationally complex and extremely expensive and require significant cross-industry build of controls that will remove citizen privacy and destroy consumer trust in stablecoin. No one will invest in GBP stablecoin whilst holding limits are in force. We recommend an approach that combines: market surveillance; flexibility in redemption management; enabling backing assets to include commercial bank deposits; and the development of financial markets to support household and SME lending.
• Backing assets: the requirement for 40% of backing assets to be Bank of England deposits makes business models unviable: constraining an issuer’s ability to invest in the infrastructure, security builds and regulatory compliance necessary to support and sustain stablecoins and to achieve its potential to operate as a low-cost accessible means of payment for both business and consumers. Less costly and disruptive solutions can be deployed to ensure liquidity in the event of a run on a stablecoin: allowing backing assets to include commercial bank deposits; enabling different commercial redemption models (including fees and variable redemption periods); and allowing greater reliance on repurchase and reverse repo for liquidity. Issuers should be able to choose the mix of backing assets between short-term government debt, commercial bank deposits and central bank deposits, and allow for issuers to match the 95% High Quality Liquid Asset requirement in the FCA’s proposed rule book.
• Same day redemption:  this creates disproportionate requirements that the US and others have not mandated; potentially impacting KYC/AML checks; and reducing scope for innovation and competition. This should, in the first instance, mirror the US approach of requiring "timely" redemption of assets for fiat and for the issuer to publish and communicate clearly a redemption policy.
• Commercial bank issuance:  the Bank’s ban on UK commercial banks issuing stablecoins (as set out in its November 2023 Dear CEO letter) should be lifted. The same outcomes can be achieved by other measures:  prevention of customer confusion about different protection levels can be achieved through outcome-based requirements rather than prescriptive branding and entity requirements. The concerns about insolvency are misplaced given that both the Bank of England and FCA regimes will have custody and safeguarding frameworks in place.
• Regulatory cliff-edge: At present uncertainty on arrangements for transition between FCA and BoE regimes presents a strong risk of disincentivising investors. Addressing the issue of holding limits and backing assets will in itself significantly reduce some of the risks of the cliff edge; and a further change to the FCA's prudential regime is also needed to iron out the mismatches (we are submitting today our response to the FCA's consultation on prudential requirements for cryptoassets which includes a K-Factor capital requirement for stablecoin based on issuance - which is at odds with the Bank's preferable approach to operational and wind down risk).

We do believe that if these issues are addressed, the UK has the basis for a strong and stable regime that supports innovation and crucially enables sustainable growth by GBP stablecoin issuers, ensuring strong (sterling) sovereign capability. 

You can read our full response here