UK Gives Bank of England Mandate to Support 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 money, making the development of new payment technologies a formal part of the central bank's responsibilities.

The new secondary objective will be introduced through an amendment to the Financial Services and Markets Bill. The Bank will also be required to report annually to Parliament on how it is supporting innovation in payment systems and digital money.

Financial stability will remain the Bank's primary objective.

The move puts stablecoins and tokenized money closer to the center of the UK's financial-services strategy, as the government seeks to position the country as a hub for digital payments and financial technology.

From Regulating Stablecoins to Supporting Their Development

The proposed mandate represents a shift in emphasis for the UK's approach to digital money.

Rather than treating stablecoins primarily as a new financial risk to be contained, the government is formally asking the Bank to consider how regulation can support innovation in payments and digital finance.

"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," City Minister Lucy Rigby said, according to the Financial Times.

The proposal follows a broader government effort to modernize the UK's payments framework. The Treasury has said it intends to create a single regulatory approach covering traditional and tokenized payments, including stablecoins and tokenized deposits, while also examining how payment rules should adapt to transactions initiated by AI agents.

The government has also been working with regulators on a dedicated stablecoin framework that is expected to allow regulated stablecoins to operate in the UK from 2027.

Bank of England Eases Some Stablecoin Constraints

The new objective comes as the Bank of England has already adjusted its approach to systemic stablecoins.

In June, the Bank abandoned proposed temporary limits on how much individuals and businesses could hold. Instead, it introduced a temporary £40 billion issuance guardrail for each systemic stablecoin, allowing users to hold and transact in the tokens without individual or business limits.

The Bank also increased the maximum share of backing assets that issuers can hold in short-term UK government debt from 60% to 70%, with the remainder held in central bank deposits. The changes are intended to support commercially viable stablecoin models while maintaining liquidity for redemptions.

The £40 billion limit is temporary and will be reviewed as the Bank assesses how stablecoins affect bank funding and credit provision.

UK Builds a Broader Digital-Money Framework

The Bank's stablecoin regime is being developed alongside the Financial Conduct Authority's wider crypto framework.

The FCA finalized rules in June covering crypto firms and stablecoin issuers, including simplified capital requirements following industry feedback. Firms will be able to apply for authorization from September 30, with the new regime scheduled to take effect on October 25, 2027.

The UK government is also working toward a regulatory framework that brings stablecoins and tokenized deposits into the broader payments system rather than treating them as entirely separate forms of financial infrastructure.

That approach reflects a broader ambition: to make tokenized forms of money usable within regulated payment networks while maintaining confidence in the financial system.

Stablecoins Are Moving Beyond Crypto Trading

The policy shift comes as the stablecoin market expands beyond its original role in crypto trading.

The global stablecoin market is now worth around $303 billion, according to DeFiLlama data cited in the original report, compared with roughly $200 billion at the beginning of 2025.

Visa data also points to growing use of smaller stablecoin transactions. Transactions below $250 rose from around $500 million in 2019 to nearly $70 billion in 2025, suggesting that stablecoins are increasingly being used for activity beyond large crypto-market transfers.

Most stablecoins remain dollar-denominated, but the UK's policy framework could create more room for sterling-denominated tokens to develop within regulated payment infrastructure.

The significance of the government's latest move is therefore not simply that Britain is preparing another set of stablecoin rules.

It is making innovation in digital money part of the Bank of England's mandate.

That gives stablecoins, tokenized deposits and other forms of digital payment money a clearer place in the UK's future financial architecture—provided they can scale without compromising the stability that remains the central bank's primary responsibility.