The UK government plans to give the Bank of England a new secondary objective focused on innovation in payment systems and emerging forms of digital money, including stablecoins. The move marks a significant shift in Britain’s approach to digital finance as policymakers seek to modernize the country’s payment infrastructure while maintaining strict financial stability safeguards.
HM Treasury announced the proposed change on August 27, saying the new responsibility will help ensure UK payments regulation keeps pace with technological development. The government intends to place the innovation objective below the Bank’s existing primary responsibility for financial stability, meaning the central bank will have to balance technological progress with the resilience of the financial system.
The announcement comes as stablecoins, tokenized assets and other forms of digital money gain greater attention from financial institutions, technology companies and regulators worldwide. For the UK, the policy could create a clearer path for businesses developing blockchain based payment products and digital settlement infrastructure.
UK Targets Digital Payments Growth
The proposed mandate could strengthen the UK’s position in the global race to develop regulated digital money. Stablecoins can facilitate faster settlement, programmable payments and potentially cheaper cross border transactions, while tokenized financial assets could create new ways for institutions to manage collateral, securities and payments. The Bank of England itself has identified faster, cheaper and more flexible payment services as potential benefits of stablecoin adoption.
The Bank has already taken significant steps toward creating a regulatory framework for systemic stablecoins. In June, it published a policy statement and draft rules covering systemic sterling denominated stablecoins, establishing requirements designed to allow these assets to develop while protecting financial stability. The framework also recognizes potential retail and wholesale applications, including merchant payments, person to person transfers and cross border transactions.
Under the UK’s broader regulatory structure, the Financial Conduct Authority will oversee UK issued qualifying stablecoins, while the Bank of England and FCA will jointly regulate stablecoin issuers whose activities become systemic and could threaten financial stability. HM Treasury will determine when a stablecoin reaches systemic status.
That structure gives the government a mechanism to encourage digital payment innovation without removing the safeguards that protect consumers, banks and the wider financial system. It also gives companies greater visibility over how stablecoin businesses can operate as they expand.
Bank Faces Innovation and Stability Test
The new objective will not replace the Bank of England’s financial stability responsibilities. Instead, it will require the institution to consider how regulation can support responsible innovation while managing risks created by new forms of money.
That balance could become increasingly important as stablecoins move beyond cryptocurrency trading into mainstream payment infrastructure. The Bank expects stablecoins could support everyday transactions, online purchases and cross border payments, while also providing programmable functionality that traditional payment systems may struggle to deliver.
The Bank is also preparing the wider infrastructure needed for a more diverse UK payments ecosystem. Its plans for longer settlement hours aim to move RTGS and CHAPS toward near 24 hour operation and support interoperability between central bank money, commercial bank money, tokenized deposits and stablecoins.
The central bank has separately continued to examine distributed ledger technology and tokenized financial markets. Its 2026 DLT Innovation Challenge explored how central bank money could operate on external distributed ledgers, while its wider experimentation programs are examining how tokenized assets can interact across different ledger systems.
These initiatives suggest that the new policy objective will operate within a much broader transformation of UK financial infrastructure. Rather than treating digital assets as an isolated cryptocurrency issue, policymakers increasingly view them as part of a future multi money system where traditional bank deposits, central bank money, tokenized deposits and stablecoins can coexist.
UK Seeks Stronger Position in Global Digital Finance
The timing also reflects intensifying international competition over digital asset regulation. The United States and European Union have moved ahead with major regulatory frameworks, increasing pressure on Britain to make its financial market attractive to companies building stablecoin and blockchain infrastructure. Reuters reported that the UK government sees the new objective as part of efforts to modernize payment infrastructure while maintaining financial stability.
For fintech companies, banks and crypto businesses, the proposed Bank of England stablecoin innovation mandate could therefore represent a meaningful change in the regulatory environment. A regulator tasked not only with controlling financial risk but also with supporting responsible payments innovation could provide businesses with greater incentives to develop products in the UK.
The government’s approach also fits with the Bank’s existing work on a potential digital pound. The Bank and HM Treasury continue to examine whether the UK should introduce a central bank digital currency for households and businesses, although no final decision has been made. The current design phase runs through 2026.
The proposed mandate ultimately signals a more innovation focused phase for UK financial regulation. The government wants Britain to remain a major financial technology centre, but it also expects the Bank of England to ensure that new payment technologies develop within a framework that preserves confidence in money and financial markets.
The amendment is expected to form part of the Financial Services and Markets Bill, which will face further parliamentary consideration in the House of Lords. If lawmakers approve the change, the Bank of England will gain a clearer statutory responsibility to support innovation in digital payments while keeping financial stability at the centre of its mandate.
