Circle has submitted its response to the Bank of England’s consultation on a proposed regulatory regime for sterling-denominated systemic stablecoins.
Circle has submitted its response to the Bank of England’s consultation on a proposed regulatory regime for sterling-denominated systemic stablecoins.
Circle has submitted its response to the Bank of England’s consultation on a proposed regulatory regime for sterling-denominated systemic stablecoins. We welcome the Bank’s continued engagement with industry and its objective of safeguarding financial stability while supporting responsible innovation in payments. The consultation represents an important step in shaping the future of digital money and payments in the UK, and the final shape of the systemic stablecoin regime will play a critical role in maintaining the UK’s international competitiveness as a global financial and fintech hub.
A summary of some key points from Circle’s response is set out below:
1. Backing asset requirements must account for commercial reality
Circle supports allowing systemic stablecoin issuers to hold central bank reserves as backing assets. Access to central bank money materially reduces counterparty risk and strengthens confidence in systemic payment instruments. We also welcome permitting a portion of reserves to be held in short-term UK government securities.
However, a fixed requirement to hold 40% of backing assets as central bank deposits on an unremunerated basis risks undermining commercial viability of the regime, without clear justification. Additionally, the Bank’s suggestion for issuers to explore alternative revenue streams such as transaction and/or processing fees from ancillary payment activities may ultimately lead to poorer outcomes for UK consumers.
If UK regulatory conditions were to constrain business models that prioritise low transaction costs for users, the result would be a less competitive stablecoin ecosystem and a missed opportunity to strengthen competition and improve consumer outcomes across the broader payments market.
2. Redemption timelines should be principles-based
Circle welcomes the Bank’s focus on timely redemption at par. Reliable redemption is foundational to confidence in payment stablecoins.
We encourage the Bank to adopt a principles-based standard for redemption timeliness rather than a rigid end-of-day requirement. In practice, legitimate compliance processes, payment-rail cut-offs, and cross-border considerations can make strict time-bound rules operationally challenging. A strict end-of-day rule risks creating perverse incentives for issuers to compromise the quality of such workflows. An outcomes-focused approach—requiring prompt, reliable redemption with clear disclosures and proportionate exceptions—would better align with global regulatory practice.
3. Holding limits are neither proportionate nor practical to implement
The consultation proposes holding limits as a safeguard against disorderly deposit outflows from the banking system. While we recognise the policy objective, we question whether rigid caps are justified given the absence of clear evidence that regulated, non-interest-bearing stablecoins pose a credible risk of large-scale deposit flight in the near future.
Holding limits also raises practical challenges. Stablecoins are bearer instruments often held through multiple wallets and intermediaries, limiting issuers’ visibility and ability to enforce individual per-coin holding caps. Without clear enforcement mechanisms, holding limits risk adding complexity and uncertainty and, when viewed alongside other elements of the regime, could have a chilling effect on market entry and scaling without delivering proportionate financial stability benefits.
4. International coordination is key to cross-border arrangements
Circle supports the Bank’s exploration of a deference framework for non-sterling systemic stablecoins issued outside the UK, and would welcome further clarity on what such an approach means in practice. Deference assessments should focus on core outcomes, such as robust prudential standards, high-quality backing assets, timely redemption, transparency, financial crime controls, and effective insolvency and resolution frameworks. Outcomes-based deference can reduce duplicative regulation and support cross-border interoperability.
Similarly, location and subsidiarisation requirements for sterling-denominated systemic stablecoins may have unintended cross-border effects. Jurisdictions which impose local issuance requirements will impact the ability for a UK-issued stablecoin to access such markets. International coordination will be critical to support efficient global use of regulated stablecoins.
5. Regulated stablecoins can unlock innovation in wholesale financial markets
Circle supports the Bank’s vision for the potential role of regulated stablecoins in wholesale financial markets. In particular, we welcome the Bank’s openness to enabling both sterling and non-sterling stablecoin use within the Digital Securities Sandbox, which will support experimentation, interoperability, and the modernisation of UK market infrastructure. We would encourage further clarity on the pathway to enable stablecoins to be used for on-chain settlement in the Digital Securities Sandbox.
Looking Ahead
Circle welcomes the Bank of England’s progress since its 2023 discussion paper and its continued openness to stakeholder feedback. With the EU’s MiCA rules and the US GENIUS Act passing since the Bank’s discussion paper, it is crucial that further refinements are made to the proposed rules to make the UK a competitive market for stablecoin issuers and broader ecosystem to scale. The UK can establish a systemic stablecoin regime that safeguards financial stability while enabling innovation and global interoperability. Getting this balance right will be critical to maintaining the UK’s position as a leading global financial hub.
