Bank of England to get new innovation mandate covering stablecoins and digital payments

The UK government plans to give the Bank of England a secondary objective to support innovation in payment systems and emerging forms of digital money, with stablecoins explicitly in scope. For PSPs and stablecoin issuers, the point is simple: the BoE’s role would not stop at stability and supervision, but would also include reporting on how it is handling payment innovation.

1. HM Treasury said on Thursday that the Bank of England would get a secondary objective to support innovation in payment systems and emerging forms of digital money. Financial stability would remain the BoE’s primary objective, so this is an add-on mandate, not a replacement for the bank’s core job.
2. The new mandate would cover payment systems that use digital settlement assets such as stablecoins. The proposal is designed to extend an existing approach already used for central counterparties (CCPs) and central securities depositories (CSDs), the market infrastructure firms that clear, hold and settle financial assets.
3. Under the proposal, the central bank would report annually to Parliament on its progress toward the payments innovation objective. That matters because the reporting requirement creates a public paper trail for how the BoE applies its stablecoin and digital money rules, not just a set of internal policy decisions.
4. City Minister Lucy Rigby said that “developments in digital payments technology, including tokenisation and DLT [distributed ledger technology], have the potential to transform financial markets across the globe.” The government expects to implement the objective through amendments to the Financial Services and Markets Bill, which is due for further debate in the House of Lords on Sept. 7 and 9.
5. The proposal lands as the UK steps up its stablecoin work through regulatory changes, payment experiments and closer coordination with the US. In August, a group in the Bank of England’s Digital Pound Lab tested whether a stablecoin and a simulated digital British pound could work together in a cross-border trade payment, using no real customers or money.

There is also a live commercial question underneath the policy language. Maksym Sakharov, co-founder and CEO of on-chain banking infrastructure provider WeFi, said the June rules for systemic stablecoin issuers, including a requirement to hold at least 30% of their backing assets in non-interest-bearing deposits at the central bank, may be the first thing that needs fixing if the UK wants these businesses to work economically.