UK Moves to Add Digital Payments Innovation Mandate for Bank of England, Including Stablecoins

The UK government wants to give the Bank of England a secondary objective focused on innovation in digital payments, explicitly extending to payment systems that use "digital settlement assets" such as stablecoins. HM Treasury announced the proposal on Thursday, stressing that financial stability would remain the central bank's primary duty. The change would apply to the Bank's oversight of payment infrastructure and would require the Bank of England to report to Parliament annually on progress toward the new innovation objective. The government plans to implement the mandate through amendments to the Financial Services and Markets Bill. The House of Lords is scheduled to debate the bill on Sept. 7 and 9. Key points - The Bank of England would gain a secondary goal to support innovation in payment systems and digital money, while financial stability stays the top priority. - The scope would include systems using digital settlement assets, including stablecoins, tying stablecoin policy more closely to payments development. - Annual reporting to Parliament would increase visibility into how the Bank advances payments innovation and applies stablecoin-related rules. - The plan is set to be embedded via amendments to the Financial Services and Markets Bill, ahead of Lords debates on Sept. 7 and 9. - Market reaction may depend on how the annual reporting process is used alongside existing stablecoin requirements. Why the innovation mandate matters for stablecoins The proposal would broaden the Bank of England's remit beyond a purely stability-led approach by adding an innovation objective alongside its established oversight of core market infrastructure, including central counterparties (CCPs) and central securities depositories (CSDs). For stablecoins, the key detail is that the mandate is not framed as research-only or limited to central bank digital money. HM Treasury said it would cover payment systems using digital settlement assets, a definition that captures stablecoins and positions them within the UK's broader payments technology agenda. Regulatory emphasis can influence how quickly new payment rails move from pilot stages to real-world deployment, and a formal innovation objective could shape how the Bank balances experimentation with risk controls. Annual reporting could increase scrutiny Although the innovation objective would be secondary, implementation details may determine how much additional room the UK framework creates for stablecoin growth. Maksym Sakharov, co-founder and CEO of WeFi, told Cointelegraph that the requirement for annual reporting could increase public scrutiny. He said the innovation objective "overrides nothing" given its secondary status, but the Bank would still have to publish yearly accounts of its work on payments innovation and digital money. Sakharov suggested the reporting requirement could draw extra attention to stablecoin rules the central bank finalized in June. Even without altering stability obligations, publishing annual updates could make the practical application of those obligations more visible. Existing stablecoin rules and the reserve debate Sakharov highlighted requirements for "systemic stablecoin issuers," including a reserve structure that, according to his comments, requires issuers to hold at least 30% of backing assets in non-interest-bearing deposits at the central bank. He argued the "reserve split is the first thing to fix," warning it could affect whether issuing stablecoins is commercially viable. Reserve rules directly affect cost structure, risk management, and the economics of issuance, shaping which issuers can scale while meeting compliance expectations. The proposed innovation mandate would not automatically change reserve mechanics, but linking the Bank's work to a public innovation objective could add political and public pressure for regulators to explain how stablecoin market design supports payments modernization. UK stablecoin momentum: testing, interoperability, and cross-border alignment The proposal lands amid increased UK policy and operational activity on stablecoins. In August, a group participating in the Bank of England's Digital Pound Lab began testing whether a stablecoin could interoperate with a simulated digital British pound for a cross-border trade payment. Project materials said the platform did not use real customers or real money. In mid-July, the UK and US issued a joint statement on stablecoins indicating an intention to enable their use in cross-border finance and calling for closer alignment between regulatory frameworks, signaling interest in harmonizing rules as well as technical interoperability. The UK has also adjusted earlier constraints. Cointelegraph previously reported that the Bank of England dropped plans to cap individual holdings at 20,000 British pounds and business holdings at 10 million British pounds. Those limits were replaced with a temporary cap of 40 billion pounds (about $52.9 billion) on issuance for each "systemic stablecoin." The change points to an approach that targets systemic risk while allowing broader participation than earlier retail- and business-specific limits. The government's push to expand the Bank's mandate also aligns with a wider effort to encourage tokenised and distributed ledger-based innovation, echoed by City Minister Lucy Rigby, who said tokenisation and DLT could transform financial markets globally. With House of Lords debates set for Sept. 7 and 9, market participants are likely to focus not only on whether the mandate is adopted, but also on how the Bank of England translates "innovation" into measurable actions, particularly around systemic issuer requirements and reserve design that shape stablecoin economics.