The UK government has proposed granting the Bank of England a new secondary statutory objective to support innovation in payment systems and emerging forms of digital money, including stablecoins. Announced by HM Treasury, the change keeps financial stability as the central bank’s primary responsibility while extending its remit to foster development in digital settlement assets.

The proposal would apply to the Bank’s oversight of payment infrastructure. Officials plan to introduce the mandate through amendments to the Financial Services and Markets Bill. Further debate is scheduled in the House of Lords on 7 and 9 September.

Scope of the New Objective

Under the plan, the Bank of England would extend an existing regulatory approach already applied to central counterparties and central securities depositories. The secondary objective would cover systemic payment systems that use digital settlement assets such as stablecoins.

The Bank would not be required to advance any innovation that could undermine financial stability. City Minister Lucy Rigby stated that developments in digital payments technology, including tokenisation and distributed ledger technology, have the potential to transform financial markets globally.

Bank of England Deputy Governor Sarah Breeden welcomed the proposal, noting it would provide further support for efforts to maintain trust and drive innovation in UK payments without compromising financial stability.

The central bank would be required to report annually to Parliament on progress toward the payments innovation objective. This reporting requirement is intended to increase accountability for how the Bank advances work on digital money and related infrastructure.

Recent Adjustments to Stablecoin Rules

The announcement follows the Bank of England’s June policy framework for systemic sterling-denominated stablecoins. The Bank dropped earlier proposals for temporary limits on individual holdings of £20,000 and business holdings of £10 million. Those were replaced with a temporary £40 billion issuance cap for each systemic stablecoin.

Under the revised rules, issuers may hold as much as 70 percent of their backing reserves in short-term British government debt, with the remainder generally held as non-interest-bearing deposits at the central bank.

Separately, the Financial Conduct Authority has finalised rules for crypto firms and stablecoin issuers. Firms can begin applying for authorisation from 30 September, with the wider regime scheduled to take effect on 25 October 2027.

Industry Perspectives and Broader Context

Some market participants have focused on the practical implications of the annual reporting requirement. Maksym Sakharov, co-founder and CEO of WeFi, noted that because the innovation objective remains secondary to financial stability, it overrides nothing. He added that the Bank would still need to publish annual accounts of its work on payments innovation and digital money, which could increase public scrutiny of existing stablecoin rules.

Sakharov also pointed to the reserve structure for systemic issuers, describing the split requiring at least 30 percent in non-interest-bearing central bank deposits as an area that could affect commercial viability.

The mandate arrives amid wider UK activity on digital money. In August, participants in the Bank of England’s Digital Pound Lab began testing whether a stablecoin could interoperate with a simulated digital British pound for a cross-border trade payment. The experimental platform does not use real customers or money.

Earlier, in mid-July, the UK and the United States published a joint statement signalling intent to enable stablecoin use in cross-border finance and calling for closer alignment of regulatory frameworks.

The proposed changes form part of broader efforts to develop a single regulatory approach covering traditional and tokenised payments, including stablecoins and tokenised deposits.

Parliament will next consider the relevant amendments when the Financial Services and Markets Bill returns to the House of Lords. The final wording of any statutory objective will determine the precise scope of the Bank’s new reporting duties and the payment systems covered.