Gillmore Centre response to the Bank of England’s 2025 consultation paper on the proposed regulatory regime for sterling-denominated systemic stablecoins

February 2026

The Gillmore Centre for Financial Technology at Warwick Business School is pleased to publish its response, submitted in February 2026, to the Bank of England’s 2025 consultation paper on the proposed regulatory regime for sterling-denominated systemic stablecoins.

The response was prepared by a Gillmore Centre working group on innovation in money and payments. It addresses a wide range of issues raised by the consultation, including backing assets, redemption, safeguarding, holding limits, payment-system access, public permissionless ledgers, wholesale use cases, and non-sterling stablecoins.

Why this consultation matters

Stablecoins are one of several forms of digital money being considered as part of the UK’s future payments landscape, alongside bank deposits, e-money, tokenised deposits and potential central bank digital currency.

The Bank of England’s consultation considers the proposed regulatory regime for sterling-denominated systemic stablecoins: any stablecoins that may become widely used for payments and therefore fall within the Bank’s remit because of their potential implications for UK financial stability.

The consultation covers questions including the assets stablecoin issuers should hold, coinholders’ redemption rights, how backing assets should be safeguarded, whether transitional limits or guardrails are appropriate, how stablecoin issuers should access payment systems, and how stablecoins might be used in retail and wholesale contexts.

These questions sit alongside the UK’s wider policy agenda on payments innovation, digital assets, tokenisation and the future role of central bank money, including the Government’s National Payments Vision and subsequent work on future retail payments infrastructure. The design of the systemic stablecoin regime will influence how new forms of private digital money interact with bank deposits, payment systems, money markets and central bank money.

Our response

Our response treats the Bank’s proposals as choices about the architecture of sterling money and payments, not only as questions of issuer-level supervision.

A central theme is par production. A stablecoin’s promise that “£1 = £1” is not delivered by backing assets alone. It depends on the wider system’s ability to provide cash-now convertibility, settlement, liquidity and interoperability in normal times and under stress. This brings into view the role of repo markets, central-bank liquidity backstops, payment-system access, corridor design, trust arrangements, operational resilience, and the interaction between private money and central bank money.

The response argues that safe sterling-denominated stablecoin innovation requires a regime that is both robust and usable. Issuer viability is not a policy goal in itself, but a regime that is technically coherent while commercially unusable would not deliver the potential benefits of safe innovation. The policy task is therefore to ensure that each regulatory burden is doing distinct stability, singleness or consumer-protection work, without imposing an unnecessarily fragile or high-friction architecture.

Key themes

Backing assets as monetary architecture: the response argues that the choice between central-bank deposits, outright securities holdings and secured lending is not merely an issuer-viability or asset-quality question. It changes how par is produced, where stress margins arise, and the monetary footprint of systemic stablecoin issuance.
Par production and liquidity: under 100% BoE-deposit backing, redemption is funded directly by central-bank liquidity. Under hybrid backing, payments-grade par depends on the issuer’s ability to monetise securities quickly and reliably under stress. This makes repo access, operating hours, haircuts, collateral mobilisation, settlement capacity and any central-bank liquidity backstop central to the credibility of “£1 = £1”.
Reinvestment, money-like claims and portfolio effects: allowing stablecoin issuers to reinvest backing assets in short-term government securities changes the monetary character of issuance. It can moderate the direct drain from bank deposits and reserves, but it also means the stablecoin remains outstanding while cash is recycled to securities sellers, potentially increasing money-like liquidity and introducing portfolio-channel effects.
Repo and reverse repo as regime choices: repo is important because it provides a route for issuers to raise cash against backing assets and meet redemptions without relying on outright sales. If the regime permits backing assets beyond central-bank deposits, the response argues there may also be a case for considering tightly constrained reverse repo: it could broaden the usable collateral base, reduce reliance on a narrow short-term government-debt market, moderate liquidity-drain dynamics, and alter the monetary footprint relative to outright securities holdings. But it would also make systemic stablecoin issuers standing participants in secured money markets.
Holding limits as architecture: holding limits may be justified as transitional safeguards, but they are not neutral. If set below ordinary working-balance needs, especially for businesses, they shift stablecoin from a money-like settlement asset into a conversion-heavy rail, making corridor performance — speed, cost, reliability, operating hours and access to intraday liquidity — central to usability and stability.
Direct access and interoperability: direct access to payment systems can reduce sponsor dependence, tiering and gatekeeper risk at the coin–deposit boundary. This matters because singleness is experienced through the user’s ability to move between forms of sterling money at par, quickly and reliably.
Statutory trust and safeguarding: statutory trust arrangements can support coinholder protection, but “trust” is not a single design. The response emphasises the importance of custody, reconciliation, waterfall clarity, operational continuity, wind-down funding and clear communication that stablecoin holders have a par monetary claim, not an investment-like claim on particular assets.
Public permissionless ledger risks: the response argues that backing quality is not enough if core money functions depend on a public ledger’s native-token economy. Even with KYC’d stablecoin users and pristine sterling backing assets, issuers, banks, wallets or other corridor providers may need to hold, source or manage liquidity in a non-sterling gas token to execute transfers, mint/burn, redemption and emergency controls. That token has a floating sterling price, and congestion, shared blockspace and validator fee flows can make sterling payment execution depend on conditions outside the regulated sterling system, including value flows to pseudonymous or non-UK-accountable validators. Meanwhile, a two-layer or Token Operator model addresses a separate legal-finality problem: it can separate raw public-chain activity from the recognised holder record, but only if the rulebook and technical design prevent, or explicitly allocate the risk of, downstream reliance on balances that are technically visible and composable before they are legally final.
Wholesale use and settlement liquidity: the response argues that wholesale stablecoins raise an elasticity problem, not only an asset-safety problem. Wholesale settlement depends on netting, intraday credit, collateral monetisation, operating hours and stress-time liquidity arrangements; without that stack, stablecoin settlement is naturally prefunded and liquidity-intensive.
Non-sterling stablecoins: the response argues that the Bank should monitor functional dependence, not foreignness as such. The issue is whether UK-facing users, platforms or markets come to rely on non-sterling stablecoins for payment, settlement, collateral, liquidity or conversion functions. Currency-substitution concerns appear limited while sterling remains embedded in domestic wages, debts, taxes and payment infrastructure; the more practical question is whether particular wallets, platforms, corridors or market functions become organised around non-sterling liquidity. Where that dependence becomes material, UK-facing interfaces still require visibility and accountability, and local backing requirements must be assessed against the risk of fragmenting otherwise fungible global liabilities.

Contributors

This response was prepared by a Gillmore Centre working group on innovation in money and payments. Contributing authors were:

Bazil Sansom, PhD — Research Fellow, WBS Gillmore Centre for Financial Technology
Professor David Skeie — Professor of Finance and Research Fellow at the Gillmore Centre for Financial Technology
Natasha de Teran — Honorary Research Fellow, WBS Gillmore Centre for Financial Technology
Martin Walker — Honorary Research Fellow, WBS Gillmore Centre for Financial Technology
George Pantelopoulos, PhD — Lecturer in Economics, University of Newcastle, Australia
Rhomaios Ram — Honorary Research Fellow, WBS Gillmore Centre for Financial Technology
Professor Dalvinder Singh — Professor of Law, University of Warwick Law School
Olga Klein — Associate Professor of Finance and Research Fellow at the Gillmore Centre for Financial Technology
Ganesh Viswanath-Natraj, PhD — Assistant Professor of Finance and Research Fellow at the Gillmore Centre for Financial Technology
Ka Kei Chan — Associate Professor of Finance and Research Fellow at the Gillmore Centre for Financial Technology

The response reflects broad agreement among the working-group participants, but not necessarily agreement with every specific observation or nuance. Members participated in their personal capacity, and their participation does not imply the support or agreement of their respective institutions.

Contact

Corresponding author

Dr Bazil Sansom:

WBS Gillmore Centre for Financial Technology