The UK is preparing to give the Bank of England a formal new mission: to back innovation in payment systems and digital money — including stablecoins — while keeping financial stability front and center. What’s changing - On Aug. 27, the government said it will add a secondary, statutory objective to the Bank of England to “support innovation” in payments, tokenisation and other forms of digital money. This will be implemented via amendments to the Financial Services and Markets Bill. - That innovation objective will be explicitly subordinate to the Bank’s primary duty to protect financial stability. The Bank would not be required to promote innovation if doing so risked stability. Why it matters - The proposed mandate extends an existing innovation objective (which currently covers central counterparties and central securities depositories) to systemic payment systems — a category that can include platforms using digital settlement assets such as stablecoins. - The change creates a formal duty for the central bank to consider and report on innovation, giving Parliament yearly visibility on whether payments regulation is keeping pace with new technology. Officials weigh in - City Minister Lucy Rigby said tokenisation and distributed ledger technology “have the potential to transform financial markets,” and that the new objective will help the Bank support digital finance while protecting stability. - Bank of England Deputy Governor Sarah Breeden welcomed the move, saying it would support innovation “without compromising on financial stability,” per the government announcement. Where this fits into the UK stablecoin regime - The announcement builds on the Bank’s June policy statement for sterling-denominated systemic stablecoins — a framework that applies to stablecoins HM Treasury designates as systemically important. - The Bank scrapped earlier temporary per-user and per-business caps (£20,000 for individuals; £10 million for most businesses) and instead imposed an initial issuance guardrail of £40 billion per systemic stablecoin. - Under the Bank’s rules for systemic stablecoins, issuers may hold up to 70% of backing reserves in short-term UK government debt; the remaining roughly 30% would typically be held as non-interest-bearing deposits at the Bank of England. Regulatory split: BoE vs FCA - The Bank will regulate systemic stablecoins; the Financial Conduct Authority (FCA) will oversee other qualifying stablecoin issuers, trading platforms, custodians and crypto intermediaries under the broader regime. - The FCA finalised its main crypto rules on June 30, covering financial resilience, market integrity, reserve composition, redemption and consumer protections. - Crypto firms can apply for FCA authorisation between Sept. 30, 2026 and Feb. 28, 2027; the mandatory regime begins Oct. 25, 2027. Existing AML registrations will not automatically convert into full authorisations — platforms, custodians, issuers and staking intermediaries must apply for the specific regulated activities they carry out. Next steps and implications - The new Bank of England objective has not yet taken effect. HM Treasury expects to table the Bill amendments when the Financial Services and Markets Bill returns to the House of Lords on Sept. 7 and 9. Parliament can approve, reject or amend the changes, and the final statutory wording will determine which payment systems are covered and how the annual reporting works. - The move also signals a competitive response to international developments: after the U.S. GENIUS Act established a federal stablecoin payment framework in 2025, the UK faces pressure to offer a predictable route to market for issuers. - UK and U.S. regulators have been talking about harmonising principles — for example, one-to-one reserve backing and cross-border coordination — although those discussions have not produced binding, shared rules. Bottom line The UK is formalising a central-bank role in nurturing payments and digital-money innovation while keeping a clear hierarchy that prioritises financial stability. For stablecoin issuers and crypto firms, the change promises clearer expectations and increased scrutiny — and a regulatory timetable they’ll need to follow closely. Read more AI-generated news on: undefined/news