What to know:
- The Bank of England prepares new UK stablecoin rules for modern digital payments.
- Breeden says tokenized finance can cut delays and improve payment efficiency.
- Digital asset firms warned strict caps and reserve rules may slow adoption.
The Bank of England has strengthened its digital payments agenda as officials prepare new rules for UK stablecoins. Deputy Governor Sarah Breeden said regulated digital money, tokenized deposits, and a possible digital pound could operate beside the existing payment systems.
Speaking at City Week 2026 in London, Breeden said tokenized finance could make payments faster, cheaper, and more efficient. She said shared digital ledgers and smart contracts could reduce delays by automating payment and settlement.
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UK Stablecoins Could Expand Payment Competition
The system needs to evolve for the growth of digital finance, the bank said. Breeden warned that activity could move outside regulatory oversight if authorities do not modernize payment infrastructure.
The central bank is collaborating with the Financial Conduct Authority and the sector with regard to the future generation of UK payment systems. It contains regulations for stablecoins, tokenized deposits, and infrastructure associated with digital asset networks in the UK.
Regulators are looking for greater competition in payments. UK stablecoins and tokenized bank deposits could be used by consumers in the near future, alongside traditional bank money, for day-to-day purchases.
All forms of digital currency should also be easily convertible, Breeden said. Convertibility would help to safeguard trust and financial stability throughout the system, she said.
The bank plans to publish draft rules for systemic UK stablecoins next month. It plans to complete the framework later this year, after considering other proposal options and comments from crypto companies.
The previous plan had a £20,000 cap on holdings of any one sterling stablecoin during the initial rollout phase. Digital asset firms criticized the proposal, claiming stringent restrictions would hinder adoption.
UK Stablecoins Face Reserve Rule Concerns
Reserve rules became a major concern. Under the previous proposals, issuers would be required to hold a minimum of 40% of the reserves in interest-free central bank deposits.
Crypto companies stated that such conditions may affect the strengthening of the market. 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 such as London Stock Exchange Group and HSBC are set to offer tokenized trading and settlement in the UK’s Digital Securities Sandbox.
Additionally, officials have plans to shift settlement hours to near 24 hours over the coming years. By 2027, the bank wants to directly link to tokenized asset networks.
The broader proposal outlines the potential for UK stablecoins, tokenized deposits, and the digital pound to play a role in the payment system of the future in the United Kingdom. The bank says modernization is needed as digital finance grows within regulated channels.
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