BoE gets duty to support stablecoin innovation

HM Treasury confirmed on August 27 that the Bank of England will be given a secondary statutory objective to support payment systems and digital money, explicitly including stablecoins. The amendment will be introduced through the Financial Services and Markets Bill, which returns to the House of Lords for debate on September 7 and 9. Once the change is enacted the Bank must publish an annual report to Parliament explaining how it is advancing the objective. “Whilst financial stability will always remain the Bank’s primary objective, this secondary objective will support the Bank to continue to drive innovation in payments and digital finance,” Lucy Rigby, the City Minister.

A secondary statutory objective directs how the Bank should exercise regulatory discretion where stability considerations allow; it does not override the Bank’s duty to protect UK financial stability. The wording covers systemic payment systems that use digital settlement assets, meaning tokenised money such as stablecoins and tokenised deposits. The same legal construction was applied to central counterparties and central securities depositories under the Financial Services and Markets Act 2023.

In June the Bank published a framework for systemic sterling stablecoins. The rules set a temporary issuance cap of £40 billion per systemic stablecoin. The framework requires at least 30% of backing assets to be held as non-interest-bearing deposits at the Bank and allows up to 70% of reserves in short-term UK government debt. The Bank is consulting on a draft Code of Practice until September 22 and plans to finalise it by the end of 2026; applications from potential systemic issuers are expected to open by year-end.

The House of Lords will debate the amendment on September 7 and 9. The Code consultation closes on September 22 and the Bank intends to finalise the code by the end of 2026. UK rules overseen by the Financial Conduct Authority will not be fully in force until October 2027.

The EU’s Markets in Crypto-Assets framework has applied to stablecoin issuers since 2024 and the United States enacted the GENIUS Act in 2025. At the Bank, executive director Sasha Mills noted that roughly 99% of stablecoins in circulation are denominated in US dollars, leaving sterling-denominated tokens a very small share of global issuance.

The Bank has continued technical work while drafting policy. Its Digital Pound Lab ran a test in August using simulated funds to explore whether a stablecoin and a simulated digital pound could be used together in a cross-border trade payment.