The Bank of England has signaled a more pragmatic approach to stablecoin regulation as Deputy Governor Sarah Breeden outlined a vision for a “multi-money” payments system where digital tokens, commercial bank deposits and central bank money coexist, provided they remain interoperable and underpinned by trust.
The Deputy Governor said, “Stablecoins, for a long time the preserve of crypto markets, are beginning to go mainstream… Their safe adoption could unlock faster, cheaper settlement for cross-border transactions as well as supporting trading of tokenized securities.”
Bank of England open to regulatory recalibration
Breeden confirmed that the Bank, along with the Financial Conduct Authority (FCA), is revisiting its 2023 proposals for a regulatory regime on systemic stablecoins. Under revised plans, issuers will be allowed to hold a portion of their backing assets in short-dated UK government bonds and other high-quality liquid assets.
The change in stance by the BoE could be attributed to the increasing success and adoption of stablecoins by institutional players, as well as the favorable regulatory landscape around stablecoins and crypto in general by the Trump-led US government and other jurisdictions.
Paul Grewal, chief legal officer of Coinbase, noted on X that Breeden’s remarks show that global competition spurs creative thinking.
The recalibration reflects the British central bank’s effort to balance innovation with financial stability.
BoE to experiment with digital money
Alongside regulatory change, the Bank of England is also carrying out experiments to test the infrastructure for digital money, one of which is the Digital Securities Sandbox.
The Sandbox, launched with the FCA, provides a regulated live environment where tokenized securities can be issued and traded. Stablecoins and tokenized deposits can be used as the “cash leg” of settlement, allowing the authorities to study risks while enabling meaningful activity.
In August, it opened the Digital Pound Lab, which offers industry participants a place to trial different use-cases for a potential retail central bank digital currency (CBDC). A blueprint for a “digital pound” is expected in 2026, exploring key design elements such as offline usability.
In the wholesale markets, the Bank is also working with the BIS Innovation Hub on a distributed-ledger challenge, testing whether wholesale central bank money could be transacted on external programmable ledgers.
Breeden sees an interoperable multi-money ecosystem
Breeden’s vision is a “multi-money” ecosystem where bank deposits, stablecoins, and central bank digital money coexist. According to the deputy governor, the key to achieving this vision is interoperability, and this involves the technical and regulatory aspects working together.
Without harmonization, the risk is a fragmented system of “walled gardens,” where users face high fees and multiple wallets. With interoperability, households and firms could switch seamlessly between forms of money, preserving the “singleness” of sterling.
The Bank will launch a consultation later this year on its revised stablecoin proposals, engaging the industry on how best to regulate digital tokens without stifling innovation.
Breeden added that the central bank’s role is not to “pick winners” but to ensure that trust in money, whether physical, digital, or tokenized, is never compromised. “Interoperability underpins the singleness of money,” she said. “And trust in money is our core concern.”
