The UK government plans to give the Bank of England (BoE) a new secondary objective to support innovation in payment systems and emerging forms of digital money, including stablecoins.
The proposed change would expand the central bank’s existing innovation responsibility for central counterparties and central securities depositories to systemic payment systems. Financial stability would remain the Bank’s primary objective, meaning it would not have to support innovation where doing so could threaten stability.
The move comes as stablecoins have become a major part of the digital asset market, with total capitalization at roughly $303 billion according to DeFiLlama. Tether’s USDT accounts for about $183.3 billion, while Circle’s USDC is valued at approximately $73.92 billion.
Bank Gets New Objective
Under the proposed changes, the Bank would have to consider innovation when overseeing payment systems, including those that use digital settlement assets such as stablecoins. The government said the objective is intended to help UK payments regulation keep pace with technological developments and create conditions for new technologies and business models to develop safely. The Bank would also report to Parliament each year on its progress under the new responsibility.
The proposal arrives as British authorities continue to develop rules for stablecoins. FinanceFeeds reported in June that the Bank had revised its approach to stablecoin holding limits, following concerns that restrictions could discourage activity in the UK.
City Minister Lucy Rigby said tokenisation and distributed ledger technology could transform financial markets, while Bank of England Deputy Governor for Financial Stability Sarah Breeden said the new objective would support innovation without compromising financial stability. Lucy noted that:
“Developments in digital payments technology, including tokenisation and DLT, have the potential to transform financial markets across the globe.”
UK Stablecoin Rules Evolve
The Bank is also examining practical uses for digital money as stablecoins become more established in payments and financial infrastructure. It has moved toward testing stablecoins and a potential digital pound for cross-border payments, adding a practical dimension to its work on how different forms of digital money could operate in future payment systems.
The Bank’s approach to stablecoin regulation has also attracted scrutiny over whether stricter requirements could discourage innovation. In June, the House of Lords Financial Services Regulation Committee warned that tighter stablecoin rules could leave Britain behind as other major financial markets develop competing regulatory frameworks.
The UK is also moving toward closer coordination with the US on digital asset regulation. In July, Britain and the US sought greater alignment on stablecoin rules, particularly around cross-border digital asset activity and the regulatory treatment of stablecoins.
The proposed Bank of England objective would therefore give innovation a formal place in the oversight of payment systems as stablecoins and other digital assets gain a larger role in financial infrastructure. The government has made clear that this would not displace financial stability as the Bank’s primary responsibility.