• Subject to their different statutory objectives and the different risks presented by systemic and non-systemic issuers, the Bank and the FCA have considered where regulatory requirements can align across both sets of rules. 
• There is a particular emphasis on ensuring clarity for issuers that may transition from being non-systemic, solo regulated firms under the FCA’s regime to joint regulation once recognised as systemic.

• Where an issuer is regulated by multiple authorities (eg the PRA or PSR as well as the FCA and/or the Bank), those authorities will engage with the firm and each other on a case-by-case basis as part of ongoing supervision and enforcement and will consider the application of relevant regulatory and transition requirements where these interact or overlap.

• The Approach Document sets out a non-exhaustive overview of the policy areas covered by both the FCA’s final rules applicable to stablecoin issuers and the Bank’s rules included in its draft Code of Practice, as well as how supervisory responsibility for those areas would be allocated in the supervision of jointly regulated systemic stablecoin issuers. Firms should refer to the FCA’s policy statement and the Bank’s draft rules for the full detail of the relevant requirements:
  • FCA as lead authority and the following FCA rules will apply:Consumer Duty; Conduct of business; Admissions and disclosures (the Bank intends to rely on the FCA’s proposed disclosure requirements for systemic issuers but if gaps are identified it may apply supplementary disclosure requirements); Market Abuse Regime for Cryptoassets (MARC); SMCR; Financial crime; ESG; Complaints and access to FOS; Conflict of interest; Whistleblowing; Fit and Proper Test for Employees and Senior Personnel (FIT), Code of Conduct (COCON), Continuing Professional Developing (CPD), Training and Competence (TC), General Provisions (GEN). (The FCA is also responsible for systemic and non-systemic stablecoin issuer supervision under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR).)
  • Areas where both FCA and Bank rules will apply: Operational resilience; Governance; Internal and external audit; Risk control; Outsourcing; Record keeping; Reporting; Issuance, legal claim and redemption; Remuneration.
  • Bank as lead authority and the following Bank rules will apply:Backing assets; Capital and reserve requirements; Safeguarding; Failure arrangements; Temporary issuance guardrail.
• The FCA will determine which of its rules are to be disapplied to avoid conflicts with the Bank’s requirements. It will consult on how the above allocation of rules and responsibilities will be operationalised once the Bank’s rules for systemic issuers have been finalised.
• If needed, the authorities will issue a further joint publication with additional detail on areas of overlap between the FCA and the Bank, the application of the Bank’s rules to systemic stablecoin issuers, and the supervisory approach to supporting issuers through transition.

• The Bank would expect to apply the principles and approach set out in its Supervisory approach to onboarding new FMIs, which complements the Bank’s overall approach to supervising FMIs, to both issuers moving from non-systemic to systemic status and new issuers recognised as “systemic at launch” (SaL).
• Regarding the FCA and Bank rules, the key areas where there is a difference in the requirements for a systemic issuer are payment system direct access, redemption, backing assets, capital and reserve requirements, safeguarding and temporary issuance guardrails. The Approach Document contains a table summarising the rules in key areas for UK stablecoin issuers.
• The Approach Document asks for stakeholder feedback on the onboarding approaches for firms transitioning from non-systemic solo FCA regulation to joint regulation following recognition by HMT as systemic and for SaL firms. It includes two hypothetical examples of both types of onboarding.

• Early information sharing and Bank engagement with issuer
  • Where a solo regulated issuer’s scale or growth may indicate a trajectory towards systemic importance, the FCA may share relevant authorisation and supervisory information with the Bank.
  • During the recognition process, the Bank will engage with the issuer to understand its business model, risk profile and the potential implications of its activities for financial stability. Where appropriate, the Bank will also engage with the issuer to support early preparation for its transition into meeting the Bank’s rules, should the firm be recognised as systemic.
  • Once an HMT recognition order has been made, the issuer will be subject to the Bank’s rules and will be jointly regulated by the FCA and the Bank.
• Transition plan
  • To avoid the situation where the issuer has to meet the Bank’s requirements from day one of full recognition, there will be transitional arrangements implemented by the Bank via its power of direction in section 191 of the Banking Act 2009 to waive or modify the requirements of its rules.
  • A specific timeframe for each issuer’s transition plan will be set, taking into account factors including the issuer’s rate of growth, the potential for disruption to UK financial stability, and the extent to which additional time may be needed to meet particular requirements.
  • The Bank may also specify the order in which requirements need to be met, informed by its risk assessment as part of the recognition process.
  • The transition period will typically be between 12 to 36 months.
• Continuing FCA supervision
  • The FCA will continue to supervise stablecoin issuers once recognised by HMT as systemic, including during any transition period set by the Bank.
  • Both authorities will also seek to ensure that any direction issued by the Bank does not impact on an issuer’s ability to comply with FCA rules applicable under the joint regime.

• Early information sharing and Bank engagement with issuer
  • Where HMT is considering recognising an issuer as SaL, the process of sharing information and engaging with the issuer will be similar.
  • However, during the recognition process the issuer should either be seeking to be authorised, or already be authorised by the FCA to issue a UK-qualifying stablecoin (see further below).
• Adjusted transitional backing assets composition
  • The aim will be to allow the firm’s business model to grow safely while limiting risks to the Bank’s objectives.
  • There is a proposed ‘step-up approach’ which will allow new stablecoin issuers recognised as SaL to hold up to 95% of their backing assets in short-term sterling-denominated UK government debt securities, with the remaining 5% held in unremunerated central bank deposits and accompanied by proportionate capital and reserve requirements. SaL issuers would, however, need to transition into fully meeting the Bank’s required backing assets composition of 30% central bank deposits and 70% short-term UK government debt securities before they can reach baseline supervision under the Bank’s FMI onboarding supervisory approach.
• Mobilisation stage following HMT recognition
  • The Bank would expect a SaL issuer to enter the mobilisation stage of its FMI onboarding supervisory approach when it becomes recognised by HMT and authorised by the FCA (as to which, see below). Here, the Bank may use its power of direction to set de minimis operational limits and specify the supervisory requirements for progression into the next stage – tailored to the issuer’s risk profile.
  • The SaL issuer will then proceed either to a scaling stage, in which it might undertake limited activity for economic value, or directly to baseline supervision. This will depend on the individual issuer’s circumstances.
• FCA supervision and authorisation
  • The FCA will supervise SaL issuers proportionately as they scale, sharing information, aligning oversight with other authorities and supporting effective management of risks.
  • The SaL issuer would need to apply for and obtain FCA authorisation under Part 4A FSMA before it carries out any regulated activities, with the application typically being made on or shortly after systemic recognition. The Approach Document highlights that the authorisation process can take up to 6 months for complete applications and up to 12 months where the application is incomplete.
  • An issuer recognised as systemic before the 25 October 2027 go-live date for the new regime would need to be registered with the FCA for MLR purposes.

The Approach Document closes to comments on 30 September 2026. It should be considered alongside the FCA’s final rules for its non-systemic stablecoins regime in its policy statement PS26/10 (see our separate article) and the BoE’s policy statement and draft rules on systemic stablecoins (open for consultation until 22 September - see our separate article).

Following the consultation, the Bank will publish a summary of responses and consider whether updates are required to existing documents including its Approach to FMI Supervision, the Approach to onboarding new FMIs, and the Memorandum of Understanding between it, the FCA, PSR and PRA. It will also consider whether additional guidance is needed for issuers transitioning into joint regulation or recognised as SaL. The FCA may respond where relevant to its remit.

As mentioned above, the Bank and the FCA may follow up with a final joint publication including further detail on how the Bank rules (Code of Practice) on systemic stablecoin issuers and FCA PS26/10 will apply in areas where rules overlap. Also as mentioned above, once the Bank rules are finalised the FCA will consult on which rules it will disapply when a firm is recognised as a systemic stablecoin issuer.

The aim is for regulated stablecoins to operate in the UK from 2027.

On 30 June 2026, the Bank updated its DSS guidance to state that the Bank and FCA will permit the use of certain stablecoins for securities settlement in the DSS. The authorities will provide further communication and, subject to amending the Central Securities Depository Regulations (CSDR), stablecoins could be used as a settlement asset by FMIs.

If you would like to discuss the potential impact of the BoE/FCA Approach Document - or any other aspect of the proposed systemic or non-systemic stablecoin regulatory regimes - on your business, please get in touch with one of the people listed above or your usual Hogan Lovells Cadwalader contact.

For example - and as the Approach Document points out - issuers likely to be recognised as systemic at launch will need to make sure that their business model, governance and operational arrangements are fully developed at the point of submission of their application for FCA authorisation, bearing in mind that incomplete applications will lengthen the time it takes to obtain authorisation from up to 6 months to up to 12 months. Our combined legal and consulting teams can help with the full authorisation journey.

Authored by Virginia Montgomery.