The British government announced plans to grant the Bank of England a new statutory objective supporting innovation in digital currency and payment systems. According to reports from The Financial Times, the Treasury will introduce a legal secondary objective for the central bank, requiring the BoE to support innovation in payment systems and digital money. City Minister Lucy Rigby stated that while financial stability will always remain the bank's primary objective, this secondary objective will support the bank to continue driving innovation in payments and digital finance, ensuring that the UK remains a global leader in financial services. The move supports the UK's ambition to maintain its leading position as a global financial center, with the new objective signaling that ministers want the Bank of England to do more to promote the UK as a hub for digital assets.
The government emphasized that the Bank would not have to support an innovation when doing so could undermine financial stability. As reported by The Financial Times, the change therefore adds a formal duty to consider innovation without weakening the central bank's existing risk controls. The proposed objective is intended to help ensure that regulation keeps pace with changes in payments technology, with the bank required to report annually to Parliament on how it is advancing the innovation objective. The reporting requirement is designed to help ensure the central bank keeps pace with technological change, with the innovation objective being subordinate to the BoE's primary mandate of financial stability.
The proposal follows the Bank of England's June policy statement covering sterling-denominated systemic stablecoins. According to reports from The Financial Times, stablecoins are crypto tokens designed to hold a steady value and are predominantly used in crypto trading as well as, increasingly, in payments. They have grown rapidly in recent years, particularly under the crypto-friendly policies drawn up by the Trump administration. The framework applies to stablecoins that HM Treasury formally recognizes as systemically important. The Bank removed planned temporary limits of £20,000 for individuals and £10 million for most businesses, replacing those restrictions with an initial £40 billion issuance limit for each systemic stablecoin. Under the revised policy, issuers can hold as much as 70% of their backing reserves in short-term British government debt, with the remaining 30% generally held as non-interest-bearing deposits at the central bank.
The Financial Conduct Authority finalized its main crypto rules on June 30, with crypto firms able to apply for authorization from September 30, 2026, through February 28, 2027. The mandatory regime is scheduled to begin on October 25, 2027, according to the FCA's rules. The new statutory objective will be introduced through an amendment to the Financial Services and Markets Bill, which is due to be debated in the House of Lords next month, as reported by The Financial Times. The Treasury said the innovation objective will be subordinate to the BoE's primary mandate of financial stability. The Bank of England has also recently softened its approach to stablecoin regulation, withdrawing plans to cap stablecoin holdings following criticism from the House of Lords Financial Services Regulation Committee, which said the rules could unnecessarily hinder industry growth.
The new objective is likely to be welcomed by financial services executives at a time when traditional banks and asset managers are exploring the use of blockchain technology, according to The Financial Times. The Bank of England aims to encourage the growth of regulated stablecoins pegged to the pound, with the central bank having been criticized by crypto companies that say it has taken too conservative an approach to digital assets. Sarah Breeden, deputy governor for financial stability at the Bank of England, said the bank is doing a huge amount, together with government and other authorities, to maintain trust and drive innovation in UK payments. This new secondary objective will further support that effort, as the UK continues its pro-growth approach to financial services regulation under the new government led by Prime Minister Andy Burnham. Regulators are also focusing on the use of blockchain technology in financial services and payments, with areas under consideration including tokenised collateral, tokenised gold and settlement models, as part of efforts to modernise financial markets.
