The UK government is planning to give the Bank of England (BoE) a new objective focused on supporting innovation in digital currencies and payment systems.
According to a Financial Times report, the Treasury will introduce a legal “secondary objective” for the central bank. It would require the BoE to support innovation in payment systems and digital money.
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City minister Lucy Rigby was quoted by the publication as saying: “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, ensuring that the UK remains a global leader in financial services.”
The shift follows criticism from some crypto businesses that the BoE has taken a cautious approach to digital assets. It also comes as the BoE and the Financial Conduct Authority step up efforts to oversee digital asset markets.
Regulators are also focusing on the use of blockchain technology in financial services and payments. Areas under consideration include tokenised collateral, tokenised gold and settlement models, as part of efforts to modernise financial markets.
The secondary objective is expected to be introduced through an amendment to the Financial Services and Markets Bill. The legislation is due to be debated in the House of Lords next month. The Treasury said the innovation objective will be subordinate to the BoE’s primary mandate of financial stability.
Under the plan, the BoE would be required to report annually on progress against the new objective. The reporting requirement is intended to help ensure the central bank keeps pace with technological change.
BoE deputy governor for financial stability Sarah Breeden was quoted by the FT as saying: “The bank is doing a huge amount, together with government and other authorities, to maintain trust and drive innovation in UK payments. This new secondary objective will further support that.”
The report follows the BoE’s publication of its planned stablecoin framework in June. The proposals are designed to regulate tokens pegged to the pound and to support the development of regulated sterling stablecoins.
The BoE had previously faced pushback over proposed ownership limits for UK stablecoins, which it said were designed to protect financial stability. That approach has been dropped and replaced with a £40bn issuance cap.
The central bank has also reduced the share of reserves backing stablecoins that must be held in zero-interest deposits at the BoE.
The change is intended to improve the commercial viability of issuing sterling stablecoins and align the UK more closely with regulatory approaches in the EU and the US.
