UK to Give BOE Innovation Mandate to Support Stablecoins, Payments

The UK government plans to give the Bank of England a new mandate to encourage innovation in digital money and payments.

The UK Treasury plans to add “promoting innovation” as a secondary objective to the BOE’s regulation of payment systems, Bloomberg reported on August 26. The central bank’s primary objective of financial stability will remain unchanged. The change is aimed at strengthening the UK’s competitiveness in digital finance.

Emma Reynolds, the UK’s Economic Secretary to the Treasury, said financial stability would remain the Bank of England’s top priority. The new secondary objective, she added, would help drive innovation in payments and digital finance and support the UK’s position as a global leader in financial services.

The UK government is paying particular attention to tokenization and distributed ledger technology, or DLT, the underlying technology behind crypto assets. Reynolds said those technologies have the potential to reshape global financial markets.

The move comes as the UK accelerates efforts to boost its competitiveness in digital assets. The UK and the US previously formed a joint task force to promote the adoption of stablecoins, whose value is linked to other assets such as the dollar.

The Bank of England has also recently softened its approach to stablecoin regulation. In June, it withdrew plans to cap the amount of stablecoins that individuals and companies could hold. The decision followed criticism from the House of Lords Financial Services Regulation Committee, which said the rules could unnecessarily hinder the industry’s growth.

Sarah Breeden, the BOE’s deputy governor for financial stability, said the central bank is working with the government and other authorities to promote innovation while maintaining confidence in the UK payments system. The new secondary objective would further support that work.

The Bank of England already has a secondary objective to promote innovation in its regulation of central counterparties, or CCPs, and central securities depositories, or CSDs. The UK government plans to extend that approach to payment systems regulation.