The UK government announced on August 27 that it intends to give the Bank of England a formal secondary objective to support innovation in payment systems and emerging forms of digital money. HM Treasury said the change would require the Bank to consider whether its regulatory decisions create conditions for new payment technologies to develop, without weakening its existing responsibility to protect financial stability.
City Minister Lucy Rigby said that developments in payments technology, including tokenization and distributed ledger technology, "have the potential to transform financial markets across the globe." She added that "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."
The proposal is not yet law. The government plans to introduce amendments to the Financial Services and Markets Bill when it returns to the House of Lords on September 7 and 9. Parliament can modify or reject those amendments, and the final statutory wording will determine how the objective applies in practice.
How the Bank of England already uses a similar structure
The new objective would not be the Bank's first secondary mandate of this kind. The Financial Services and Markets Act 2023 introduced an innovation objective covering the Bank's regulation of central counterparties and central securities depositories. That framework required the Bank to consider innovation when supervising those market infrastructure entities while keeping financial stability as the overriding concern. The August 27 announcement extends the same model to systemic payment systems, including those that use digital settlement assets such as stablecoins.
Bank of England Deputy Governor for Financial Stability Sarah Breeden said the Bank welcomed the announcement.
"We welcome today's announcement, which will further boost our work to support innovation in financial services without compromising on financial stability," Breeden said. "The Bank is doing a huge amount, together with government and other authorities, to maintain trust and drive innovation in UK payments. This new secondary objective will further support that."
The Bank will report annually to Parliament on how it is advancing the objective, a requirement that gives lawmakers a fixed channel through which to assess whether payments regulation is keeping pace with technology.
The stablecoin rules that changed before this announcement
The policy shift arrives months after the Bank of England revised its approach to systemic stablecoins in a June policy statement. Earlier draft rules had proposed temporary holding limits of £20,000 per individual and £10 million for most businesses. The Bank removed both caps and replaced them with a £40 billion issuance limit per systemic stablecoin after the industry argued that individual caps would undermine the payment use case.
Under the June framework, issuers of recognized systemic stablecoins can hold up to 70% of backing reserves in short-term British government debt. The remaining 30% must be held as non-interest-bearing deposits at the central bank. The Financial Conduct Authority will supervise non-systemic stablecoin issuers, trading platforms, custodians, and crypto intermediaries under the broader regime.
The FCA finalized its main crypto regulatory rules on June 30. Authorization applications open September 30, 2026, and close February 28, 2027. The mandatory authorization regime is scheduled to take effect October 25, 2027. Existing anti-money-laundering registrations do not automatically convert to full authorizations under the new framework.
Where the UK stands relative to US stablecoin regulation
The timing of the secondary objective proposal reflects competitive pressure from the United States. The GENIUS Act, signed into law in 2025, created a federal framework for payment stablecoins and required rulemaking from the OCC, Treasury, FDIC, and Federal Reserve. The OCC said in August it expects to publish final implementation rules by November, ahead of the law's January 2027 effective date.
US and British officials have held discussions on cross-border stablecoin coordination, including on reserve standards and supervisory cooperation, though those conversations have not produced binding joint rules. The proposed Bank of England objective adds a statutory basis for the UK to align its regulatory posture more directly with the pace of market development, rather than applying financial stability frameworks designed for traditional payment infrastructure to instruments that operate differently.
The secondary objective does not require the Bank to support any specific innovation. HM Treasury's announcement was explicit that the Bank would not need to advance innovation where doing so could compromise financial stability. The policy adds a duty to consider innovation as a factor in regulatory decisions, not an obligation to approve any particular technology or product.
The mandate's practical effect will depend on how amendments emerge from Parliament and how the Bank interprets the reporting requirement. The annual Parliamentary reporting process gives the secondary objective teeth that a purely aspirational policy statement would lack, since the Bank will need to demonstrate progress against a statutory duty rather than a discretionary commitment.
Tanya Petrusenko
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