The Bank of England has launched a formal consultation on its proposed rules for regulating systemic stablecoins, the digital assets that are pegged to traditional currencies and that are increasingly used as a means of payment and a store of value within the cryptocurrency ecosystem and beyond.
The draft rules, which are published alongside a policy statement explaining the Bank's approach, would require systemic stablecoin issuers to hold high-quality liquid assets equivalent to the value of the coins in circulation, to maintain a capital buffer sufficient to absorb losses, and to have governance and risk management arrangements that meet the standards expected of systemic financial infrastructure.
The rules are designed to address the risk that a stablecoin could fail in a way that disrupts the broader financial system. The collapse of TerraUSD in 2022, which wiped out approximately $40 billion of value and triggered a broader crisis in cryptocurrency markets, demonstrated that stablecoins could be sources of systemic risk even though they were designed to be stable. The Bank's rules are intended to ensure that a similar event in the future does not threaten the stability of the financial system.
The consultation is open for three months, and the Bank expects to finalise the rules by the end of the year. The rules would come into force in mid-2027, at which point systemic stablecoin issuers operating in the UK would be required to obtain authorisation from the Bank and to comply with its requirements on an ongoing basis.
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