Author: Liang Yu
Editor: Zhao Yidan
On November 10, 2025, the Bank of England announced the long-awaited regulatory framework for stablecoins, allowing systemic stablecoin issuers to invest up to 60% of their reserve assets in short-term government debt. This policy marks a significant shift in the UK's attitude towards digital currencies.
On the same day the Bank of England announced the new regulations, the UK’s HM Revenue and Customs issued a tax warning to cryptocurrency investors, while a group of bankers and blockchain developers were passionately discussing the future of tokenized pound deposits in an old building in the City of London.
These seemingly contradictory yet coexisting phenomena are a microcosm of the current regulatory landscape for real-world assets (RWA) in the UK.
This established financial powerhouse is striving to find a delicate balance between maintaining financial stability and promoting innovation in the wake of Brexit. Bank of England Deputy Governor Sarah Breeden stated that the UK aims to align its stablecoin regulatory rules with those of the United States to alleviate concerns about the UK lagging behind in regulatory progress.
1. Regulatory Turning Point: The Far-Reaching Significance of the UK Stablecoin Framework
On November 10, 2025, the Bank of England unveiled the long-anticipated stablecoin regulatory framework, allowing systemic stablecoin issuers to invest up to 60% of their reserve assets in short-term government debt, while setting individual holding limits at £20,000 and corporate limits at £10 million.
This policy signifies a major shift in the UK's stance on digital currencies.
Interestingly, the previously skeptical Bank of England Governor Andrew Bailey has softened his position. The central bank has clearly stated that it will adopt a more lenient regulatory approach and will not impose stricter limits on the reserve assets that underpin stablecoin value.
This policy shift not only provides clear regulatory guidance for the UK digital asset market but also demonstrates the central bank's determination to seek a balance between financial innovation and risk management.
According to the consultation document, new entrants to the market, or those transitioning from FCA regulation, may initially invest 95% of their reserve assets in short-term UK government debt to support their commercial viability during the growth phase.
This gradual regulatory approach reflects the pragmatic attitude of UK regulators.
2. The Struggle for Regulatory Autonomy in the Context of Brexit
After leaving the European Union, the UK faces the urgent task of redefining its status as a global financial center. This pressure has prompted the UK to accelerate the construction of a competitive digital asset regulatory framework.
"Our goal is to support innovation and build trust in this emerging form of currency," said Bank of England Deputy Governor Sarah Breeden when discussing the regulatory framework, "but we must maintain public trust in currency while accelerating innovation."
This cautious attitude has made the UK more conservative in its regulatory stance compared to the United States. However, Deputy Governor Breeden also emphasized that the UK will strive to align its stablecoin regulatory rules with those of the United States to alleviate concerns about the UK lagging behind in regulatory progress.
The Financial Services and Markets Act 2023 (FSMA 2023) has become a key piece of legislation showcasing the UK's regulatory autonomy post-Brexit. This act not only establishes comprehensive regulatory boundaries for digital assets but also creates a unique "digital securities sandbox" mechanism, allowing companies to test innovative products in a controlled environment.
UK regulators have adopted a relatively lenient approach towards non-systemic stablecoins. These stablecoins, primarily used for cryptocurrency trading, will continue to be regulated by the Financial Conduct Authority (FCA), while systemic stablecoins will be subject to stricter oversight by the Bank of England.
This tiered regulatory approach reflects the UK's risk-based regulatory philosophy.
3. The UK’s Unique Approach to Stablecoin Regulation: Tiered Regulation and Financial Stability
The UK's regulation of stablecoins adopts a tiered approach based on systemic importance, which is unique globally. Systemic stablecoins—those that may pose potential risks to the UK's financial stability—face stricter regulatory requirements.
According to the consultation document released by the Bank of England on November 10, systemic stablecoin issuers must not only meet reserve asset allocation requirements but also must hold 40% of their assets in non-interest-bearing accounts at the Bank of England.
For new market entrants, this ratio can be relaxed to 5% during the initial phase, providing a certain adaptation period.
To ensure that the traditional banking system does not face excessive deposit outflow pressure during the transition period, the Bank of England has proposed a holding limit for systemic stablecoins—£20,000 per individual user and £10 million per corporate user.
These limits are expected to be gradually lifted as the financial system adapts to the new form of currency.
However, the tiered regulation has also sparked discussions about market competition fairness. Varun Paul, Digital Asset Director at Fireblocks, pointed out that the Bank of England's proposal is a "missed opportunity," arguing that the UK could have set a global standard for stablecoin regulation.
Smaller stablecoin issuers face a clear competitive disadvantage as they cannot access the central bank's liquidity arrangements.
"The 40% non-interest-bearing asset requirement will severely erode profitability," said a founder of a UK stablecoin startup who wished to remain anonymous, "this is essentially paving the way for large institutions."
4. Tightening Tax Regulation: New Requirements Under the CARF Framework
The UK’s HM Revenue and Customs is significantly strengthening its regulatory oversight of cryptocurrency tax compliance. Starting January 1, 2026, the UK will officially implement the OECD's Crypto-Asset Reporting Framework (CARF), requiring crypto-asset service providers to complete self-certification processes for new clients.
More importantly, there is a shift towards international tax cooperation. Under CARF requirements, the UK will automatically exchange crypto-asset transaction information with approximately 70 jurisdictions worldwide. Crypto-asset service providers must complete their first round of reporting by May 31, 2027, although compliance requirements will take effect from January 2026.
This global tax transparency initiative aims to address the cross-border tax challenges posed by crypto-assets. HM Revenue and Customs will directly obtain user transaction data from domestic and foreign cryptocurrency exchanges, significantly enhancing its regulatory capabilities.
The Crypto-Asset Reporting Framework (CARF), developed by the OECD, establishes international standards for the automatic exchange of crypto-asset information. Crypto-asset service providers must submit user and transaction data to HMRC, which will be shared with other jurisdictions to ensure compliance with the framework on a global scale.
5. Positive Exploration in Market Practice: From Theory to Application
Despite cautious regulation, the UK has shown a proactive exploration in market practice. UK regulators are creating limited experimental environments for RWA tokenization through tools like the "digital securities sandbox."
This mechanism allows regulators to observe the performance of new products and services in a real but controlled environment, thereby formulating rules that better align with market realities.
At the same time, the UK Financial Conduct Authority is actively promoting the development of digital asset settlement services. The ClearToken CT Settle platform will enable institutions to settle cryptocurrency, stablecoin, and fiat transactions using a delivery versus payment model simultaneously for both parties involved in the transaction.
The development of this infrastructure lays the technological foundation for the large-scale application of RWAs.
"Our participation demonstrates our leadership in the digital finance space, and we are building the infrastructure for the future economy in collaboration with leading UK institutions," said Gilbert Verdian, founder and CEO of Quant, when discussing the development of the UK's digital asset infrastructure.
According to industry reports, RWA tokenization has grown by 380% globally in just three years, reaching $24 billion. The UK is seeking to position itself favorably in this global trend.
6. The UK's Position in Global Competition: Balancing Prudence and Innovation
The UK faces multiple pressures in the global RWA regulatory competition. Compared to jurisdictions like the UAE that adopt rapid licensing strategies, the UK's regulatory approval process is relatively lengthy, which may lead some innovative companies to migrate to regions with more flexible regulations.
The GENIUS Act passed by the US Senate aims to mainstream stablecoins, while the EU's MiCAR regulatory framework is set to be fully implemented by the end of 2024, highlighting the urgency for the UK to solidify its position.
The UK's cautious approach contrasts with the more flexible frameworks of the US and Singapore, which are advancing more rapidly.
The Bank of England has pledged to roll out stablecoin rules "as quickly as the US" to alleviate concerns about the UK lagging behind its global allies.
This statement indicates that the UK is actively coordinating its regulatory pace with international standards, focusing on maintaining financial stability while promoting innovation.
However, UK regulators face unique challenges in balancing innovation and risk. Bank of England Deputy Governor Sarah Breeden pointed out that due to the UK's mortgage market's heavy reliance on commercial bank financing, stablecoins could pose potential impacts on the banking system and credit supply.
This cautious attitude reflects the high level of concern among UK regulators regarding financial stability risks.
7. The Path Ahead: Development Path for Digital Pound and Legal Reforms
The Bank of England is actively advancing the research and development of a digital pound (CBDC), which could have profound implications for RWA tokenization.
On one hand, the digital pound could provide a more efficient and secure payment settlement tool for RWA transactions; on the other hand, the introduction of the digital pound may alter the competitive landscape of the stablecoin market, potentially substituting privately issued stablecoins to some extent.
The UK Treasury will establish a "Digital Markets Director" to coordinate the digitalization of blockchain-based wholesale financial market asset issuance, trading, and settlement.
This initiative indicates that the UK is taking a more coordinated approach to drive the digital transformation of financial markets, creating the infrastructure conditions for the large-scale application of RWAs.
In terms of legal reforms, UK regulators will also test the use of stablecoins and other payment solutions in a new digital securities sandbox.
This testing environment will provide regulators with valuable experience, helping them formulate regulatory rules that better suit the characteristics of digital assets without compromising overall financial stability.
UK investment firm IG Group recently predicted that the UK’s crypto market could expand by about 20% next year with the rollout of new regulated products and settlement infrastructure. This forecast reflects the market's positive response to the UK's regulatory progress.
The ancient stone walls of the City of London have witnessed centuries of financial change and are now witnessing yet another fusion of tradition and modernity. The balanced path chosen by the UK in RWA regulation is both a respect for its financial traditions and a rational embrace of the digital future.
As the comprehensive implementation of stablecoin regulatory details and the Crypto-Asset Reporting Framework takes place in 2026, the path laid out by the UK for the large-scale application of RWAs may not be as eye-catching as that of some more radical jurisdictions, but its prudence and stability may be precisely what this emerging field of asset tokenization needs for growth.
"Regulation is not the enemy of innovation, but the cornerstone of sustainable innovation." This slogan, hanging in the corridors of the UK Financial Conduct Authority, perhaps best encapsulates the philosophical reflection of the UK on its path of RWA regulation. In the global digital finance race, the UK is writing its own reconciliation path between traditional financial empires and the digital age at its own pace.
Some sources of information:
· "Bank of England Launches Consultation on Regulating Systemic Stablecoins"
· "Bank of England Plans to Exempt Proposed Corporate Stablecoin Holding Limits, BNY Mellon Explores Allowing Tokenized Deposits and Blockchain Payments"
· "UK Financial Institutions Pilot Tokenized Pound Deposits with Six Major Banks"
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