The United Kingdom (UK) Treasury decided to give the Bank of England (BoE) a new role to support innovation in payment systems and digital currencies.
Under the new role, the BoE will report to Parliament every year on its progress in promoting innovation. Even with this new role, financial stability will remain the Bank’s main objective.
Oversight Extension for the Central Bank
On August 26, the UK government announced its plan to give the Bank of England a new role with the intention to support innovation in payments and digital finance while helping the UK remain competitive in the global financial sector.
The UK’s Economic Secretary to the Treasury, Lucy Rigby, stated that financial stability will remain the primary responsibility of the Bank.
The government also highlighted tokenization and distributed ledger technology (DLT), which it considers technologies that could change financial markets. The BoE’s new objective will extend its existing responsibility to promote innovation in the regulation of payment systems.
The Bank already has a similar secondary objective for some financial market infrastructures, including central counterparties and central securities depositories.
BoE Deputy Governor for Financial Stability, Sarah Breeden, said that the Bank is already working with the government and other authorities to support innovation while maintaining confidence in UK payment systems.
UK Lowers Stablecoin Capital Requirements
As the UK moves toward a more supportive regulatory approach to digital assets, the Financial Conduct Authority (FCA) has already finalized its cryptoasset regulatory framework back in June.
It sets the capital requirement for stablecoin issuers at 1% of the total value of stablecoins in circulation, lower than the earlier proposal of 2% and half of the capital requirement under the European Union’s Markets in Crypto-Assets (MiCA) regulation.
The new rules are expected to allow firms to begin applying for authorization to issue qualifying stablecoins from September 30, 2026, with the new framework being introduced in stages through 2027.
In June, the BoE dropped plans to limit the amount of stablecoins that individuals or businesses could hold. The change was made after concerns that strict limits could hinder the growth of the industry.
Balancing Innovation and Financial Stability
The new policy of the UK government is part of its overall effort to promote digital asset and payment innovation while maintaining financial stability. The government has already faced criticism for being too cautious in regulating digital assets and new payment technologies.
The new secondary objective intends to encourage the BoE to consider innovation as part of payment-system regulation.
At the same time, the BoE’s primary objective remains financial stability. This means that the BoE will still need to consider financial risks when supporting new technologies and new payment systems.
The annual reporting requirement will allow the Parliament to monitor the Bank’s progress toward its innovation objective. The policy aims to balance the UK’s goal of becoming more competitive in digital finance while maintaining strong financial oversight.
