The Bank of England is proposing new regulations for stablecoins that will hold a significant influence in the UK’s financial system. These rules are designed to manage risk and ensure stability, especially when it comes to the potential use of stablecoins for payments and settlements. The proposal requires issuers to maintain a minimum 40% reserve with the Bank of England while also allowing up to 60% investment in short-term UK government debt. To ease the transition for early adopters, systemic issuers will be able to hold up to 95% of reserves in government debt during this initial stage. This framework will apply specifically to stablecoins used for payments and will leave trading stablecoins under the oversight of the Financial Conduct Authority (FCA). The BoE’s proposal also includes temporary holding limits of £20,000 for individuals and £10 million for businesses, with exemptions available for larger companies. These limits will not apply to stablecoins used in wholesale financial settlements within the Bank and FCA’s Digital Securities Sandbox. Liquidity backstops are also being explored to provide a safety net for issuers during periods of market stress. Feedback on these proposals is welcome until February 10, 2026. The initiative signifies a step toward a more modern UK payments system that can include secure digital money options.