PRA clarifies expectations on innovations in deposits, e-money and regulated stablecoins

On 18 May 2026, the Prudential Regulation Authority (PRA) issued a Dear CEO letter to UK deposit-takers which reaffirms and updates its expectations on innovations in deposits, e-money and regulated stablecoins. The letter supersedes the PRA’s 2023 Dear CEO letter and should be read alongside the PRA’s May 2026 Dear CEO letter on the prudential treatment of banks’ cryptoasset exposures. It follows secondary legislation passed in February 2026 enabling the regulation of stablecoins and cryptoassets in the UK.

Core message

The PRA welcomes innovation and competition in digital money, including tokenised deposits, but remains focused on safety and soundness and financial stability risks. The PRA’s broad expectations from 2023 are unchanged, but the letter adds detail on how to interpret them in light of market developments.

Retail focus and contagion risk

The letter addresses risks in the retail context and highlights contagion risks where deposits and e-money or stablecoins share the same branding, given FSCS protection applies to deposits but not to e-money or stablecoins. The PRA is concerned that issues in one product could trigger unwarranted loss of confidence in another, with rapid contagion as seen during the March 2023 banking turmoil. The PRA stresses that retail confidence should not depend on customers understanding fine legal or regulatory distinctions.

Distinct branding and customer experience

Deposit-takers may innovate within deposits (including tokenised deposits and transferable deposit claims) inside the deposit-taking entity. If a group issues e-money or stablecoins, issuance should be from a separate non-deposit-taking, insolvency-remote entity with distinct branding. Supervisors will assess overall customer experience including naming, branding, access, and information to ensure sufficient differentiation from deposits. Clear, prominent and ongoing information on differing protections is required; disclosures and customer education support but cannot alone mitigate confusion.

Insolvency-remoteness and transition

The PRA expects e-money and stablecoins to be issued from a separate, insolvency-remote entity so that stress or failure does not adversely affect the wider deposit-taking group or continuity of deposit-taking services. Supervisors may allow a proportionate transitional period where firms have credible and timely plans to achieve insolvency-remoteness.

Wholesale-only stablecoin use cases

Where stablecoin holdings are limited to wholesale customers, the PRA considers confidence risks less prevalent than for retail. Firms should engage early with supervisors and explain access restrictions, risk management, and applicable regulatory regimes; the Bank of England is working to expand settlement assets in the Digital Securities Sandbox to include stablecoins.

Ongoing regulatory framework

The PRA’s expectations supplement and do not replace existing regulatory requirements for deposits, e-money or stablecoins. Firms should continue to keep supervisors informed of material developments in their plans under Fundamental Rule 7.

How FM Legal can assist

If your firm is exploring tokenised deposits, e-money or stablecoins and need assisting reviewing branding, legal entity structures, liquidity and operational resilience frameworks and governance arrangements against the Bank of England’s expectations, contact FM Legal for a confidential discussion.