The UK government intends to expand the Bank of England’s responsibilities to include a secondary mandate focused on fostering innovation in payment systems and digital forms of money, including stablecoins. HM Treasury announced the proposal on Thursday, framing it as a step to modernize financial infrastructure while preserving the central bank’s core financial stability objective.
Under the proposed changes, the BoE would report annually to Parliament on its progress toward this innovation goal. The mandate would apply to payment systems using digital settlement assets such as stablecoins, aligning with the central bank’s existing oversight of central counterparties and securities depositories. The government plans to implement the objective through amendments to the Financial Services and Markets Bill, with further debate scheduled in the House of Lords on September 7 and 9.
The move follows broader UK efforts to integrate stablecoins into regulated payment systems. In August, a group participating in the Bank of England’s Digital Pound Lab tested the interoperability of a stablecoin with a simulated digital pound in cross-border trade payments, though the platform did not involve real customers or funds. Earlier, in mid-July, the UK and US issued a joint statement affirming their intention to enable stablecoin use in cross-border finance and calling for regulatory alignment.
The BoE had previously considered capping individual stablecoin holdings at 20,000 pounds and business holdings at 10 million pounds, but these limits were replaced with a temporary issuance cap of 40 billion pounds per systemic stablecoin. Industry stakeholders have raised concerns about the 30% reserve requirement for systemic stablecoin issuers to hold backing assets in non-interest-bearing deposits at the central bank, with some arguing it may affect commercial viability.
City Minister Lucy Rigby emphasized the potential of developments in digital payments technology, including tokenization and distributed ledger technology, to transform global financial markets.
