UK to grant Bank of England new mandate for digital payment innovation

The UK government plans to grant the Bank of England a new secondary statutory objective to support innovation in payment systems and digital money, including stablecoins and tokenized assets. This mandate, to be introduced via amendments to the Financial Services and Markets Bill, aims to ensure the UK remains a global leader in digital finance while maintaining financial stability as the Bank's primary priority.

Under the proposal, the Bank of England will be required to report annually to Parliament on its progress regarding this innovation objective. The move follows criticism from the cryptocurrency industry that the central bank has maintained an overly conservative approach to digital assets. Recent regulatory adjustments include removing individual ownership limits on stablecoins and replacing them with a £40 billion issuance cap for systemic issuers.

Additionally, the Bank has eased reserve requirements, allowing issuers to hold a larger portion of backing assets in interest-bearing accounts rather than zero-interest central bank deposits. The government intends to foster a “multi-money ecosystem” where stablecoins, tokenized assets, and a potential digital pound can coexist. Legislative debate on the bill is scheduled for September 7 and 9 in the House of Lords.