UK to Give Bank of England New Mandate to Foster Stablecoin Innovation

The UK government plans to give the Bank of England a new statutory objective to support innovation in stablecoins and other forms of digital currency, while keeping financial stability as its primary responsibility. The change would be made through an amendment to the Financial Services and Markets Act. Under the proposal, the central bank would be required to report to Parliament each year on progress related to payment systems and digital-currency innovation. Lucy Rigby, City Minister at HM Treasury, said the secondary objective would help the Bank continue to drive innovation in payments and digital finance, supporting the UK's aim to retain global leadership in financial services. The government is also working toward a unified regulatory framework that covers both traditional and tokenized payments. In June, the Bank of England dropped its earlier proposal for temporary caps on stablecoin holdings by individuals and companies. It instead set an issuance limit of £40 billion (about $54 billion) for each systemic stablecoin. Under the framework, issuers can allocate up to 70% of reserve assets to UK short-term government bonds, with the remainder held at the central bank. The Financial Conduct Authority (FCA) has also finalized rules for crypto firms and stablecoin issuers, including simplified capital requirements. Firms can begin applying for authorization from September 30, and the new rules are set to take effect on October 25, 2027. Market data underscores the sector's growth. DeFiLlama estimates the stablecoin market at about $303 billion, up from roughly $200 billion at the start of last year, with USD-pegged tokens accounting for the bulk. Visa data shows retail stablecoin transactions under $250 climbed from $500 million in 2019 to nearly $70 billion last year, pointing to rising consumer adoption.