**Bank of England Announces Regulatory Framework for Stablecoins by End of 2026**
The Bank of England has set a definitive timeline to introduce a comprehensive regulatory framework for stablecoins by the end of 2026. This move aims to integrate stablecoins into the mainstream financial system while managing associated risks effectively.
**Key Features of the Proposed Framework**
Under the proposed regulations, stablecoin issuers will be required to back their coins primarily with high-quality, short-term government bonds. Specifically, these reserves must consist mostly of government bonds that mature in less than three months, ensuring liquidity and safety.
This approach is designed to guarantee that stablecoins can always be exchanged for real currency, maintaining a full peg to their underlying assets. Additionally, the framework allows a small portion of these reserves to earn interest, which could stimulate demand for UK government debt and encourage companies to issue sterling-based bonds.
Importantly, the Bank of England will exempt crypto exchanges and settlement firms from the initial proposed holdings caps. This decision comes after addressing earlier industry concerns around limits on how much stablecoin individuals and businesses could hold, which were initially intended to prevent rapid outflows from traditional bank accounts.
Deputy Governor Sarah Breeden emphasized that any initial limits would be lifted once related risks are properly managed, supporting innovation in the digital asset sector without compromising financial stability.
**Public Consultation to Begin November 10**
A public consultation on these proposed rules is scheduled to commence on November 10. The Bank of England will seek input from the financial industry, technology firms, and consumer groups to refine and finalize the regulations.
**Stablecoin Market Overview and Global Context**
Currently, the cumulative market capitalization of stablecoins stands at approximately $307.31 billion, according to DefiLlama data. Although stablecoins linked to the British pound presently represent a small segment, the UK’s regulatory developments aim to boost alternatives for its digital payment systems and counter the dominance of the US dollar (USD).
The UK framework closely models guidelines from the United States, reflecting a growing global consensus on the need for clear stablecoin regulations.
**Impact of the GENIUS Act and Industry Movements**
Following the approval of the GENIUS Act by former US President Donald Trump—the first legislation addressing stablecoins—major financial institutions are actively pursuing stablecoin projects. These digital currencies promise faster, cheaper international payments and facilitate the tokenization of real-world assets such as stocks and bonds.
JPMorgan Chase, the world’s largest bank by market value, has become a key player in this space. In June, JPMorgan filed a trademark for “JPMD,” a digital token expected to function similarly to a stablecoin tailored for institutional clients. JPMorgan’s CEO Jamie Dimon, previously a cryptocurrency skeptic, has since confirmed the bank’s intent to deepen its involvement with stablecoins to maintain competitive positioning.
In October, a consortium of global banking giants including Citibank, Goldman Sachs, and Bank of America announced plans to explore the creation of a joint stablecoin.
**European Perspective on Stablecoin Adoption**
Europe remains cautiously observant of these developments. European Central Bank President Christine Lagarde has voiced concerns that widespread use of USD-pegged digital currencies could undermine the euro and threaten European monetary sovereignty.
Pierre Gramegna, Managing Director of the European Stability Mechanism (ESM), echoed this sentiment, stating, “Europe should not be dependent on US dollar-denominated stablecoins, which are currently dominating markets.” He also acknowledged that stablecoins are “an inevitable part of this equation,” underscoring the need for strategic responses within Europe.
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As the Bank of England moves forward with its regulatory framework, the coming years are poised to reshape how stablecoins operate within the UK and the broader global financial landscape. Stakeholders are encouraged to participate actively in the upcoming consultation process starting November 10, helping to shape a secure and innovative future for digital currencies.
https://www.cryptonewsz.com/bank-of-england-stablecoin-regulation-2026/
