Bank of England Handed New Legal Duty to Foster Stablecoin Innovation

The Bank of England is to be handed a legal duty to promote innovation in payments and digital money, in the clearest signal yet that ministers want the central bank to move faster on stablecoins.

The Treasury said Wednesday it would create a statutory “secondary objective” covering payment systems and digital money, subordinate to the Bank’s primary responsibility for financial stability. It arrives as an amendment to the Financial Services and Markets Bill, due before the House of Lords in September, and will require the Bank to report to parliament each year on its progress.

“Whilst financial stability will always remain the Bank’s primary objective, this secondary objective will support the Bank to continue to drive innovation in payments and digital finance, ensuring that the UK remains a global leader in financial services,” City Minister Lucy Rigby said in a statement, adding that tokenization and distributed ledger technology could transform financial markets.

The objective follows sustained criticism from crypto firms, which have accused the Bank of an overly conservative approach to digital assets.

The Bank of England and stablecoins

Much of that pressure has already told. When the Bank set out its rules for sterling-pegged tokens in June, it dropped planned caps on how much of a stablecoin any one holder could own, replacing them with a £40 billion issuance limit. It also cut the share of backing assets that issuers must park in zero-interest deposits at the central bank, a change aimed at making a UK stablecoin commercially viable against rival jurisdictions.

Sarah Breeden, the Bank’s deputy governor for financial stability, welcomed the new objective. “The bank is doing a huge amount, together with government and other authorities, to maintain trust and drive innovation in UK payments,” she said. “This new secondary objective will further support that.”

Sasha Mills, the Bank’s executive director for financial market infrastructure, told a conference in May that it treats stablecoins as “a new form of money” that must be “equally robust” as every other form. Applications from would-be issuers of systemic sterling stablecoins are due to open by the end of the year.

The move comes amid mounting global competition on stablecoins. The EU’s MiCA regime has applied to stablecoin issuers since June 2024, with the full framework in force that December, and the U.S. followed with the GENIUS Act last year. Some 99% of stablecoins in circulation are dollar-denominated, Mills said in May, leaving sterling tokens a sliver of a market the Bank now wants to grow. Its governor has flagged a coming tussle with Washington over who supervises them.