Bank Of England Plans to Launch Stablecoin Regime and Tokenized Collateral In 2026

TLDR

Table of Contents

Bank of England plans to introduce stablecoin rules, with deposit accounts and liquidity backstop.
Stablecoins could modernize UK retail and wholesale payments by offering faster transactions.
Bank of England to release guidance on tokenized collateral under UK EMIR rules.
The Digital Securities Sandbox will expand to include stablecoins for testing wholesale settlements.

The Bank of England (BoE) is set to prioritize the development of systemic stablecoins and tokenized collateral policies in 2026, signaling a commitment to shaping the future of the UK’s digital financial markets. This move is expected to modernize payments and drive innovation in the financial sector while maintaining financial stability. Sasha Mills, the BoE’s Executive Director for Financial Market Infrastructure, confirmed these plans during her speech at the Tokenisation Summit.

BoE’s Strategy for Systemic Stablecoins

The Bank of England has outlined its intentions to introduce a stablecoin framework that includes deposit accounts at the BoE for major issuers. This would come with a liquidity backstop, which could help stabilize the market.

The framework’s backing structure is planned to consist of 60% short-term UK gilts and 40% Bank of England deposits. This move aims to encourage stablecoin adoption while ensuring the system’s security.

The BoE also proposes holding limits for both individuals and businesses. Individuals would have a temporary holding limit of £20,000, while businesses would be allowed up to £10 million. The BoE hopes to finalize this framework by the end of 2026, in collaboration with the Financial Conduct Authority (FCA). According to Mills, systemic stablecoins offer the potential to modernize both retail and wholesale payments, offering faster, cheaper, and more efficient transactions.

Tokenized Collateral under UK EMIR Rules

In addition to the stablecoin framework, the Bank of England plans to issue new policy guidance regarding tokenized collateral under the existing UK EMIR (European Market Infrastructure Regulation) rules. Tokenized assets that are already eligible as regulatory collateral may qualify, provided the appropriate risk mitigation measures are in place. This approach is aimed at ensuring the safe and efficient use of tokenized assets within the current regulatory landscape.

The potential for tokenized collateral to operate under UK EMIR rules will make it easier for market participants to engage with digital financial assets. By adapting existing frameworks to accommodate emerging technologies, the BoE hopes to enhance market efficiency without compromising regulatory standards. Mills emphasized the importance of risk-based supervision to ensure that tokenized collateral meets safety requirements while fostering innovation in the market.

Expanding the Digital Securities Sandbox

As part of its broader digital finance strategy, the Bank of England will expand its Digital Securities Sandbox. This initiative will include the testing of regulated stablecoins for wholesale settlement purposes. The sandbox aims to provide a controlled environment for testing new market structures and technologies while ensuring that they comply with regulatory standards.

The expansion of the sandbox is an effort to support safe experimentation and facilitate the growth of digital financial services in the UK. By including stablecoins in this testing environment, the BoE aims to gather insights into how these digital assets can be integrated into traditional financial systems. This expansion aligns with the BoE’s goal of building a resilient and efficient financial infrastructure that supports innovation.

Focus on Resilient Financial Infrastructure

Mills emphasized that resilient Financial Market Infrastructures (FMIs), risk-based supervision, and international collaboration are vital to unlocking the potential of digital finance. The BoE is working towards creating a framework that balances innovation with the need to maintain financial stability.

By prioritizing the development of systemic stablecoins and tokenized collateral policies, the BoE aims to ensure that the UK remains at the forefront of the global digital finance landscape.

Through these initiatives, the Bank of England seeks to build a holistic digital financial market that brings real benefits to the economy. The changes expected in 2026 will lay the foundation for a more modern, efficient, and secure financial system in the UK, benefiting businesses, consumers, and market participants alike.