UK to Add New Bank of England Mandate to Back Stablecoin and Digital Money Innovation

The UK government plans to give the Bank of England a new legal mandate to promote innovation in stablecoins and other forms of digital money, while keeping financial stability as the central bank's primary duty. The Treasury said the change would be introduced as a secondary objective via an amendment to the Financial Services and Markets Bill. Under the proposal, the Bank would be required to report annually to Parliament on how it is supporting innovation in payment systems and digital money. The move would formalize the government's broader effort to modernize the UK payments landscape. Officials are working toward a single regulatory framework that covers both traditional and tokenized payments, including stablecoins and tokenized deposits, and are also examining how rules may need to evolve for payments initiated by AI agents. "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," City Minister Lucy Rigby said, according to the Financial Times. Regulatory expectations for systemic stablecoins have also been adjusted. In June, the Bank dropped proposed temporary limits on how many stablecoins individuals and businesses could hold, replacing them with a temporary issuance cap of 40 billion pounds ($54 billion) for each systemic stablecoin. Issuers would be permitted to hold up to 70% of reserves in short-term UK government debt, with the remainder kept as central bank deposits. Separately, the Financial Conduct Authority has finalized rules for crypto firms and stablecoin issuers, including simplified capital requirements introduced after industry feedback. Companies can apply for authorization from Sept. 30, and the regime is set to take effect on Oct. 25, 2027. The stablecoin market is valued at about $303 billion at the time of writing, up from roughly $200 billion at the start of last year, according to DeFiLlama. Most of the market remains concentrated in U.S.-dollar stablecoins. Visa data cited in the report points to increased consumer activity: retail-sized stablecoin transactions below $250 rose from $500 million in 2019 to nearly $70 billion last year. CoinDesk said it contacted the Treasury for comment but had not received a response at the time of publication.