The UK government has revealed plans to assign the Bank of England the new responsibility of fostering innovation in payment systems and emerging forms of digital currency, including stablecoins.
Reforming Without Compromising Stability
This new mandate will be secondary to the Bank's primary goal of safeguarding financial stability. This ensures that the support for innovation does not undermine the resilience of the financial system. The central bank will provide an annual report to Parliament detailing progress towards this objective.
City Minister Lucy Rigby stated that advancements in digital payment technologies, such as tokenization and distributed ledger technology (DLT), have the potential to transform global financial markets. She emphasized that the proposed expansion of the regulator's responsibilities will help the UK maintain its leadership in financial services.
Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, welcomed the initiative, highlighting that it will enhance efforts to support innovation while ensuring stability.
Broadening Regulation to Include Stablecoins
A similar secondary mandate was previously established for regulating central counterparties and custodians. This approach is now being extended to systemically important payment systems, including those utilizing digital settlement assets like stablecoins.
Amendments are set to be made via changes to the Financial Services and Markets Bill, which is scheduled for discussion in the House of Lords on September 7 and 9.
It is worth noting that in April, the UK Treasury introduced a strategy for reforming the payment sector, which aims to unify the regulation of traditional services, stablecoins, and tokenized deposits under a single legal framework.