Summary
- The Treasury announced on Wednesday that it will assign the Bank of England a secondary statutory goal to encourage innovation in payment systems and digital currency.
- This obligation will be included as an amendment to the Financial Services and Markets Bill, which is set to be presented to the House of Lords next month.
- The Bank will be required to provide an annual report to Parliament detailing its progress towards this goal.
The Bank of England is set to receive a legal mandate to promote advancements in payment methods and digital currencies, signaling a clear intention from ministers for the central bank to expedite its efforts regarding stablecoins.
On Wednesday, the Treasury stated that it would establish a statutory "secondary objective" focused on payment systems and digital currency, which will be subordinate to the Bank's main duty of ensuring financial stability. This initiative will be introduced as an amendment to the Financial Services and Markets Bill, which is scheduled for discussion in the House of Lords in September, mandating the Bank to report annually on its advancements.
According to City Minister Lucy Rigby, "While financial stability will always be the Bank's top priority, this secondary goal will aid the Bank in continuing to foster innovation in payments and digital finance, ensuring that the UK remains a leader in global financial services." She noted that tokenization and distributed ledger technology have the potential to revolutionize financial markets.
This new objective comes in response to ongoing criticism from cryptocurrency companies, which have accused the Bank of adopting an excessively cautious stance towards digital assets.
The Bank of England's Approach to Stablecoins
Sarah Breeden, the Bank's deputy governor for financial stability, expressed her support for the new objective, stating, "The Bank is actively working, alongside the government and other authorities, to uphold trust and promote innovation in UK payments. This new secondary objective will enhance those efforts."
Sasha Mills, the Bank's executive director for financial market infrastructure, remarked at a conference in May that they regard stablecoins as "a new form of money" that must be "as robust" as any other currency. Applications from potential issuers of systemic sterling stablecoins are expected to open by the end of this year.
This development occurs amid increasing global competition in the stablecoin sector. The EU's MiCA regime has been applicable to stablecoin issuers since June 2024, with the complete framework taking effect that December. The U.S. has also enacted the GENIUS Act last year. Mills noted in May that approximately 99% of stablecoins in circulation are dollar-based, leaving UK sterling tokens with only a small portion of the market that the Bank aims to expand. The governor has indicated an impending conflict with Washington over regulatory oversight of these assets.