The UK government is proposing to grant the Bank of England a secondary objective focused on supporting innovation in payment systems, including stablecoins and other digital settlement tools. Financial stability will remain the central bank's primary responsibility under the plan.
The proposal forms part of updates to the Financial Services and Markets Bill currently moving through Parliament. It aims to enable regulatory frameworks to keep pace with emerging payment technologies.
New Secondary Objective
Under the proposal, the Bank of England would receive a secondary objective covering innovation in systemic payment systems. This would encompass new technologies and digital settlement assets such as stablecoins, while the Bank's primary duty to protect financial stability remains unchanged.
City Minister Lucy Rigby stated that technologies like tokenization and distributed ledger systems could transform financial markets globally. "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," Rigby said.
The Bank of England already operates under a similar secondary innovation objective when overseeing central counterparties and central securities depositories. The government now proposes extending this approach to payment systems built on digital settlement assets.
Implementation and Oversight
Under the plan, the Bank would be required to report annually to Parliament on its progress regarding the new innovation objective. A formal framework for measuring that progress would also be established.
Deputy Governor for Financial Stability Sarah Breeden said the Bank welcomed the proposal, noting it would help support innovation in financial services while maintaining financial stability protections.
The House of Lords is scheduled to debate the changes on September 7 and September 9, with the outcome expected to determine whether the new mandate becomes law.
