Bank of England Embraces Stablecoin Innovation With New Secondary Mandate

A Secondary Innovation Mandate for Digital Money

The United Kingdom is taking a significant step toward embracing digital assets by expanding the Bank of England’s regulatory remit. The UK government announced this week that it plans to grant the central bank a new secondary objective focused on supporting innovation in payment systems and emerging forms of digital money, including stablecoins. The move, outlined by HM Treasury, maintains financial stability as the BoE’s primary concern while introducing a fresh focus on technological advancement in payments infrastructure.

The proposed mandate will specifically address payment systems utilizing digital settlement assets such as stablecoins, mirroring the regulatory approach already applied to central counterparties and central securities depositories that handle clearing, custody, and settlement of traditional financial assets. Under the new framework, the Bank of England will be required to publish annual reports to Parliament detailing its progress toward supporting payments innovation, introducing a layer of transparency and public accountability to the initiative.

Legislative Path and Implementation Timeline

The UK government plans to codify this mandate 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. Lucy Rigby, the UK’s City Minister, highlighted the potential of emerging technologies in reshaping global financial markets. “Developments in digital payments technology, including tokenisation and distributed ledger technology, have the potential to transform financial markets across the globe,” Rigby said.

However, industry observers note that the secondary nature of this mandate means it will not override the central bank’s financial stability priorities. Maksym Sakharov, co-founder and CEO of on-chain banking infrastructure provider WeFi, told Cointelegraph that while the annual reporting requirement won’t grant the BoE new enforcement powers, it could significantly amplify public scrutiny of the regulator’s stablecoin policies. This heightened accountability could prove instrumental in refining existing regulations, particularly the central bank’s reserve requirements for systemic stablecoin issuers.

Addressing Commercial Viability Concerns

Current BoE stablecoin regulations, finalized in June, require systemic stablecoin issuers to maintain at least 30 percent of their backing assets in non-interest-bearing deposits at the central bank. Industry participants view this reserve split requirement as a critical factor determining whether stablecoin business models remain commercially sustainable. The additional scrutiny from the annual reporting process could create pressure to revisit these reserve specifications.

The UK’s stablecoin strategy extends beyond regulatory frameworks. In August, participants in the Bank of England’s Digital Pound Lab began testing interoperability between stablecoins and a simulated digital British pound in a cross-border trade payment scenario. Meanwhile, the UK and US published a joint statement in mid-July outlining their intention to enable stablecoin usage in cross-border finance and align their regulatory approaches. Most recently, the BoE abandoned plans to impose strict individual and business holding limits on stablecoins, opting instead for a 40 billion pound issuance cap per systemic stablecoin provider.

By positioning innovation and stablecoin development as a formal secondary objective of its central bank, the UK is signaling its commitment to remaining a competitive hub for digital asset infrastructure while preserving financial stability safeguards.

As major economies legitimize stablecoins as foundational payment infrastructure, the broader cryptocurrency ecosystem stands to benefit from increased regulatory clarity and institutional adoption pathways.

Source: HM Treasury, via Cointelegraph. Not financial advice.