The UK government announced plans to assign the Bank of England an additional responsibility to support innovation in payment systems and new forms of digital money, including stablecoins.
Reform Without Compromising Stability
The new mandate will be secondary to the Bank of England’s primary goal of safeguarding financial stability. This means that supporting innovation should not undermine the resilience of the financial system. The central bank will report annually to Parliament on progress towards this goal.
City Minister Lucy Frazer stated that the development of digital payment technologies, including tokenization and DLT, has the potential to transform global financial markets. The planned expansion of the regulator’s duties will help the UK maintain its leadership in financial services, she emphasized.
Sarah Breeden, Deputy Governor of the Bank of England for Financial Stability, welcomed the initiative, noting that it will strengthen efforts to support innovation without compromising stability.
Extending Regulation to Stablecoins
Previously, a similar secondary mandate was introduced for the regulation of central counterparties and depositories. Now, this approach extends to systemically important payment systems, including those using digital settlement assets like stablecoins.
The changes are planned to be introduced through amendments to the Financial Services and Markets Bill, which will be discussed in the House of Lords on September 7 and 9.
In April, the UK Treasury introduced a strategy for payment sector reform. It envisions integrating the regulation of traditional services, stablecoins, and tokenized deposits into a single legal framework.
