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- The UK plans to give the Bank of England a secondary mandate supporting innovation in digital payments and digital money.
- Stablecoin reserve requirements and the temporary £40 billion issuance cap remain important issues for the industry.
- BoE experiments and UK-US cooperation show that stablecoins are becoming a bigger part of Britain’s payments strategy.
The UK government is preparing to give the Bank of England (BoE) a new mandate focused on innovation in digital payments, with stablecoins and other forms of digital money expected to play a central role. The proposed change would encourage the central bank to support emerging payment technologies while keeping financial stability as its primary responsibility.
HM Treasury announced the proposal on Thursday, saying the additional objective would cover payment systems using digital settlement assets, including stablecoins. The government intends to introduce the change through amendments to the Financial Services and Markets Bill.
BoE to Report on Payments Innovation
Under the proposal, the Bank of England would be required to report to Parliament each year on its progress toward supporting innovation in payments and digital money.
The framework builds on an existing approach covering central counterparties and central securities depositories. City Minister Lucy Rigby said technologies such as tokenization and distributed ledger technology could reshape financial markets globally.
The proposal is scheduled for further debate in the House of Lords on Sept. 7 and 9. If implemented, the mandate would give the BoE a clearer role in encouraging development across the UK’s digital payments sector.
Stablecoin Regulation Remains a Key Issue
The new objective does not override the BoE’s financial stability responsibilities. Maksym Sakharov, co-founder and CEO of on-chain banking infrastructure provider WeFi, said the annual reporting requirement could nevertheless increase scrutiny of the central bank’s approach to stablecoins.
One major issue is the reserve framework for systemic stablecoins. Current rules require issuers to keep at least 30% of backing assets in non-interest-bearing deposits at the central bank. Sakharov argued that the reserve structure could have a significant effect on the commercial viability of stablecoin businesses.
The BoE has also replaced earlier proposed individual and business holding limits with a temporary £40 billion issuance ceiling for each systemic stablecoin.
UK Expands Digital Money Experiments
The mandate comes as Britain broadens its work on digital money. Participants in the BoE’s Digital Pound Lab have been testing whether a stablecoin and a simulated digital pound could operate together in cross-border trade payments. The experiment uses neither real customers nor real money.
The UK is also coordinating with the United States. In July, both governments issued a joint statement supporting greater regulatory alignment and expressing an intention to enable stablecoins in cross-border finance.
The proposed mandate signals that the UK wants innovation to become a more explicit part of its payments policy while retaining financial stability as the BoE’s top priority. The September parliamentary debate will provide an important test of the government’s plans.
Also Read: Bank of England Changes Stablecoin Rules: 5 Major Updates Crypto Investors Need to Know
For stablecoin issuers, banks and payment companies, the combination of regulatory reform, testing and international coordination could make the UK an increasingly important market for digital payment innovation.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
