The UK government is proposing a new secondary objective for the Bank of England focused on encouraging innovation in systemic payment systems, including stablecoins, tokenized assets and digital settlement technologies. Financial stability would remain the Bank’s primary responsibility, creating a framework designed to promote financial innovation without weakening regulatory safeguards.
- The Bank of England could receive a formal mandate to encourage innovation in payments and digital finance.
- Stablecoins, tokenized assets and distributed-ledger settlement could benefit from a clearer regulatory focus.
- The House of Lords is expected to debate the proposed changes on Sept. 7 and 9.
UK Seeks to Give the Bank of England a Bigger Role in Digital Finance
The UK government is moving toward a policy framework that would give the Bank of England a more explicit role in supporting innovation across the payments sector.
Under the proposal, the central bank would receive a secondary objective covering innovation in systemic payment systems. The remit would include emerging technologies and digital settlement instruments such as stablecoins.
The new responsibility would sit beneath the Bank’s existing primary mandate of maintaining financial and monetary stability.
City Minister Lucy Rigby said developments such as tokenization and distributed ledger technology could significantly influence the future structure of financial markets.
The government’s approach is intended to strike a balance: regulators would be encouraged to facilitate useful technological development while ensuring that new payment systems do not introduce unacceptable risks to the wider financial system.
Stablecoins Could Gain Greater Regulatory Recognition
The proposed change could have particular significance for the stablecoin industry.
Stablecoins are increasingly being developed for payments, settlement and transfers rather than simply cryptocurrency trading. As their potential role in mainstream financial infrastructure grows, regulators face the challenge of creating rules that allow innovation without compromising consumer protection or financial stability.
The Bank of England already has a secondary innovation objective in areas involving central counterparties and central securities depositories.
The government now wants to extend a similar principle to systemic payment infrastructure.
That could provide the Bank with a clearer statutory basis for considering how regulation affects stablecoin issuers, tokenized payment platforms and blockchain-based settlement networks.
Deputy Governor for Financial Stability Sarah Breeden welcomed the proposal, saying the additional responsibility could strengthen the Bank’s efforts to encourage financial innovation while maintaining stability.
Tokenization Becomes Part of the UK’s Financial Infrastructure Strategy
The proposed mandate forms part of a broader UK effort to modernize the country’s financial infrastructure.
Tokenization could allow traditional assets and financial claims to be represented digitally and transferred using blockchain or distributed-ledger technology. Stablecoins, meanwhile, could provide programmable digital settlement assets for payments and financial transactions.
Giving the Bank a formal innovation objective could encourage policymakers to evaluate these technologies not simply as emerging crypto products, but as potential components of regulated financial infrastructure.
This distinction could become increasingly important as banks, fintech companies and payment providers experiment with blockchain-based settlement.
Bank Would Have to Report on Its Progress
The proposed framework would also introduce greater accountability.
The Bank of England would be expected to report to Parliament each year on its progress toward the innovation objective. A formal mechanism would also be established to evaluate how effectively the Bank is supporting technological development.
The government intends to introduce the change through amendments to the Financial Services and Markets Bill.
The House of Lords is scheduled to debate the proposal on Sept. 7 and Sept. 9, making those discussions an important step in determining how the UK’s digital-finance framework develops.
A Potential Boost for the UK’s Stablecoin Ambitions
For crypto and fintech companies, the proposal could provide greater clarity around the UK’s long-term approach to stablecoins and tokenized settlement.
A central bank formally tasked with supporting innovation may be more willing to engage with new payment technologies, conduct regulatory experimentation and consider how digital assets can operate alongside traditional financial infrastructure.
However, the proposal does not mean the Bank of England would prioritize innovation over stability.
The hierarchy remains clear: financial stability would continue to be the Bank’s primary objective, while innovation would operate as a supporting responsibility.
The UK Is Moving Toward Integration Rather Than Separation
The policy shift reflects a broader evolution in how governments are approaching digital assets.
Rather than treating stablecoins and blockchain networks as an entirely separate financial ecosystem, UK policymakers increasingly appear focused on determining how these technologies can operate within existing regulated markets.
If approved, the new mandate could encourage further development of stablecoin payments, tokenized securities, blockchain settlement and digital financial infrastructure in the UK.
The broader message is that London wants to remain competitive in the rapidly developing digital-finance sector—but intends to pursue that ambition within a framework where innovation and financial stability advance together.
