The Bank of England’s Prudential Regulation Authority (PRA) has updated its guidance on how banks should approach stablecoins, e-money and tokenized deposits, superseding a 2023 Dear CEO letter on the same topic. The letter was published as part of a broader regulatory package from the Bank and FCA covering the authorities’ tokenization vision, the prudential treatment of tokenized assets, and extended RTGS operating hours.
The most notable shift is a lighter approach to wholesale stablecoins. Banks considering stablecoin issuance exclusively for wholesale customers are invited to engage with supervisors early, with the PRA signaling it will take a “proportionate approach” to assessing proposals. The Bank is also working to expand the Digital Securities Sandbox to include stablecoins as settlement assets.
For retail stablecoins and e-money, the PRA reaffirmed that banks must issue these from a separate insolvency-remote entity rather than the deposit-taking entity itself, citing the risk of customer confusion between insurance protected deposits and unprotected products. In an unusual step, the PRA drew an explicit comparison to the GENIUS Act’s insolvency-remoteness requirements. It offered more flexibility on branding than the 2023 letter implied. Banks can reference the parent brand, for example through a “by XYZ” label, provided the overall customer experience creates sufficient distinction.
Article continues …
Want the full story? Pro subscribers get complete articles, exclusive industry analysis, and early access to legislative updates that keep you ahead of the competition. Join the professionals who are choosing deeper insights over surface level news.
