UK to add stablecoin innovation as new Bank of England objective

Bank of England to get new role in stablecoin innovation

The UK government plans to add a new legal objective for the Bank of England. This objective will focus on supporting innovation in stablecoins, digital money, and payment systems. The bank’s main duty will remain financial stability.

The change will be made through an amendment to the Financial Services and Markets Bill. The Bank of England will have to report annually to Parliament on how it is advancing innovation in these areas.

Key details of the plan

• The Bank of England’s primary duty will stay financial stability.
• The new secondary objective will support innovation in stablecoins and digital payments.
• The government will amend the Financial Services and Markets Bill to include this change.
• The Bank of England will report yearly to Parliament on its progress.
• A temporary £40 billion cap will apply to each systemic stablecoin.
• Stablecoin issuers can hold up to 70% of reserves in short-term UK government debt.

What the government says

City Minister Lucy Rigby stated that while financial stability remains the Bank of England’s main goal, the new objective will help the UK stay a leader in financial services. The government aims to modernize payments by creating a single regulatory framework for both traditional and tokenized payments, including stablecoins.

What is confirmed

• The UK government plans to add a secondary objective to the Bank of England’s duties.
• The objective will focus on innovation in stablecoins, digital money, and payments.
• Financial stability will remain the bank’s primary responsibility.
• The Bank of England will report annually to Parliament on this objective.
• A temporary £40 billion cap for each systemic stablecoin is planned.
• The Financial Conduct Authority has finalized rules for stablecoin issuers, effective October 25, 2027.

What is still unclear

• No details on how the Bank of England will measure success in innovation.
• The government has not explained how the new objective will interact with existing financial stability duties.
• It is unclear how the £40 billion cap will be enforced or adjusted over time.

Why this matters for digital payments

Stablecoins are a type of digital money designed to keep a steady value, often tied to a traditional currency like the US dollar. The stablecoin market has grown from $200 billion at the start of last year to around $303 billion now. Retail transactions under $250 using stablecoins have increased from $500 million in 2019 to nearly $70 billion last year. This growth shows more people are using stablecoins for everyday payments.

The UK’s move could encourage more innovation in digital payments. It may also set an example for other countries looking to regulate stablecoins and digital money.

Sources

• CoinDesk
• UK Government
• Financial Times