The United Kingdom is moving to put stablecoins at the center of a new Bank of England mandate aimed at supporting innovation in digital payments, a step that could reshape how the country regulates the fastest-growing corner of the crypto market.
HM Treasury announced on Thursday that the government plans to give the Bank of England a secondary objective to support innovation in payment systems and emerging forms of digital money. The mandate will cover payment systems that use digital settlement assets such as stablecoins, while financial stability will remain the central bank’s primary objective.
“Developments in digital payments technology, including tokenisation and DLT [distributed ledger technology], have the potential to transform financial markets across the globe,” City Minister Lucy Rigby said in the announcement.
A new secondary objective for the Old Lady
Under the proposed change, the Bank of England would report annually to Parliament on its progress toward the payments innovation objective. The model extends an existing approach used to regulate central counterparties and central securities depositories, the infrastructure entities that help clear, hold and settle financial assets.
The government expects to implement the objective through amendments to the Financial Services and Markets Bill, which is scheduled for further debate in the House of Lords on September 7 and 9. That timeline means the mandate could become law within weeks rather than months.
Crucially, the innovation objective is secondary, meaning it does not override the bank’s stability remit. But it does force the institution to publicly account for how it is fostering digital money innovation, a meaningful shift for a regulator that has often been criticized by the crypto industry for moving slowly.
Industry eyes the reserve requirements
The new mandate’s real impact may depend on how the Bank of England uses its annual reporting requirement, according to Maksym Sakharov, co-founder and CEO of on-chain banking infrastructure provider WeFi.
“The objective is secondary to financial stability, so it overrides nothing, but the bank will have to publish an annual account of its innovation efforts in payments and digital money,” Sakharov told Cointelegraph. That requirement could put greater public scrutiny on the stablecoin rules the central bank finalized in June.
Sakharov pointed in particular to requirements for systemic stablecoin issuers to hold at least 30 percent of their backing assets in non-interest-bearing deposits at the central bank, a constraint that eats directly into issuer economics since those reserves generate no yield.
“The reserve split is the first thing to fix,” he said, adding that the requirement could determine whether a stablecoin business is commercially viable in the UK at all.
A year of stablecoin momentum
The new mandate follows a stretch of accelerating UK activity around stablecoins, the crypto assets designed to maintain a stable value by tracking reserve assets such as the US dollar or the British pound.
In August, a group participating in the Bank of England’s Digital Pound Lab began testing whether a stablecoin and a simulated digital British pound could work together in a cross-border trade payment. The experimental platform does not use real customers or money, but it represents early stage work on interoperability between private stablecoins and future central bank infrastructure.
In mid-July, the UK and US published a joint statement on stablecoins, with the two governments saying they intend to enable the use of stablecoins in cross-border finance and calling for greater alignment of their regulatory frameworks. The statement positioned the transatlantic partnership as a counterweight to other regulatory blocs moving at different speeds.
The Bank of England has also softened some earlier positions. It previously planned to limit stablecoin holdings to 20,000 British pounds for individuals and 10 million pounds for businesses, but replaced those caps with a temporary 40 billion pound issuance limit, roughly 52.9 billion USD, for each systemic stablecoin. The June rulemaking cleared a path for launches as early as 2027.
What comes next
The September debates in the House of Lords will be the first concrete test of whether the innovation objective survives the legislative process intact. If passed, the Bank of England will need to begin publishing annual innovation reports, giving the industry and Parliament a regular window into how seriously the institution treats digital payments.
For stablecoin issuers and payments firms, the stakes are commercial as much as regulatory. The UK remains one of the largest financial centers in the world, and a functioning stablecoin regime with clear rules, workable reserve requirements and an innovation-minded supervisor could attract issuers that have so far focused on the US, the EU under MiCA, and Asia.
The message from Westminster is that the Bank of England is being nudged, gently but formally, to treat digital money innovation as part of its job rather than a threat to be managed. How the Old Lady balances that new mandate against its stability instincts will be one of the defining regulatory stories of the coming year.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
innovation objective is secondary so it overrides nothing, but forcing the old lady to publish an annual innovation report is still a win
watch what happens to the june reserve rules before celebrating. a mandate without loosening those is just paperwork
the june reserve rules are the whole ballgame. if those stay as strict as drafted, issuers will just pick another jurisdiction and the mandate means nothing
coinbase already parked its EEA base in Ireland. if the june reserve rules stay strict the uk mandate is a press release
coinbase picking ireland also says the EEA rules are workable. if the uk june rules land softer, that flip happens fast, mandates are cheap
coinbase went to ireland years before any of this tho. the flip needs actual uk rules on paper, a secondary objective is a press release until then
the june rules are drafted strict on purpose. now the boe has a statutory reason to loosen them and save face at the same time
save face is the mechanism. statutory cover to soften strict draft rules is classic consultation choreography
^ this. the mandate is a headline, the reserve asset rules are the actual decision and those are still pending
A secondary innovation mandate with stability first is a reasonable compromise. The UK has been drafting stablecoin rules for years though, so I will believe it when the rules actually land.
boe getting an innovation mandate feels like your grandma getting a tiktok account. hopeful but lets see
Grandma analogy is unfair. The BoE ran Project Meridian with DLT settlement years ago. They have people who understand this stuff.
meridian was a wholesale test with like six banks in a sandbox. retail stablecoins at national scale is a completely different problem, fair point but weak comparison
fair, meridian was a sandbox with six banks. but the DLT settlement experience transfers, someone at the old lady has actually moved tokenized gilts
Six banks in a sandbox is still six more DLT settlements than most G7 central banks have run. The meridian comparison holds up better than you think
annual report to parliament on a payments innovation objective sounds nice until you realize the FCA consultation on stablecoins has been circling since 2023. deadlines or it didnt happen
^ two regulators one deadline. classic uk setup, the mandate lands and everyone waits on the other shoe
An innovation mandate with stability first is fine on paper. Parliament will still ask why UK stablecoin issuers are smaller than Estonia’s
sept 7 and 9 in the lords is the actual date to watch. everything else is just the old lady promising homework
sept 7 and 9 in the lords it is then. everything before that date is positioning noise
the lords dates are set but the june reserve rules were drafted before any mandate existed. that sequencing usually favors a softer final text, watch the amendments not the second reading
agreed, sept 7 is the whole ballgame. if the lords committee softens the reserve rules the mandate suddenly has teeth
Lucy Rigby citing tokenisation and DLT in an official announcement is progress the UK would never have made in 2023. Stability first is fine, just publish the June rules
stability first has been the excuse since 2021 tbh. annual parliament reports will just be 40 pages of we are monitoring
secondary objective is doing a lot of heavy lifting in that sentence. boe gets to claim innovation wins without ever moving first on the june rules
exactly, and rigby citing tokenisation in the same breath as stability is the tell. they want the fintech headlines without moving first on the june rules
fca and boe both pointing at each other while issuers set up in dublin. a secondary objective wont fix that, actual june reserve rules will