UK Treasury Mandates Bank of England to Accelerate Stablecoin and Digital Money Innovation

New Secondary Objective Takes Effect

The UK Treasury has created a statutory mandate requiring the Bank of England to champion innovation in payments systems and digital currencies, according to the announcement made Wednesday via an amendment to the Financial Services and Markets Bill. The amendment will advance to the House of Lords for consideration in September. Under this new secondary objective, the central bank must present annual progress reports to parliament documenting its efforts to support this goal, with financial stability remaining its core priority. City Minister Lucy Rigby highlighted how tokenization and distributed ledger technology could reshape global financial markets, positioning the UK to maintain its competitive edge in financial services.

Responding to Industry Pressure and Global Competition

The policy shift represents a response to mounting criticism from the cryptocurrency sector, which has characterized the Bank of England as overly risk-averse in its approach to digital assets. The central bank has already begun making adjustments. Earlier this year, when establishing rules for sterling-backed stablecoins in June, regulators abandoned proposed caps on individual holdings and instead introduced a £40 billion total issuance limit. They also reduced the mandatory reserve requirement for zero-interest deposits held at the central bank, a change designed to improve the commercial attractiveness of UK stablecoins relative to offerings in other jurisdictions. Sarah Breeden, the Bank’s deputy governor for financial stability, supported the new directive, noting that the institution is already undertaking significant work alongside government partners to maintain confidence and foster innovation in UK payment infrastructure.

The Global Stablecoin Race Intensifies

This development arrives as nations worldwide compete for leadership in the digital currency space. The European Union’s Markets in Crypto-Assets Regulation took effect for stablecoin issuers in June 2024 and became fully operational by year-end. The United States introduced the GENIUS Act in 2025, establishing its own framework for digital asset oversight. Applications for systemic sterling stablecoins will begin accepting submissions before 2026 concludes. Sasha Mills, the Bank’s executive director for financial market infrastructure, emphasized that stablecoins warrant treatment as a novel money form that must meet the same rigorous standards as conventional monetary instruments. Mills also noted that dollar-denominated stablecoins comprise approximately 99 percent of the total stablecoin market, suggesting significant room for sterling-based alternatives to capture market share.

Source: UK Treasury, via Decrypt. Not financial advice.