Bank of England Gets New Innovation Objective for Digital Payments

The Bank of England has been given a new innovation objective: promoting innovation in payment systems and digital forms of money. This move has sparked attention, particularly in Europe, as the UK's crypto regulation framework diverges from the EU's. The new objective is secondary to the Bank's primary remit of financial stability.

The announcement has led to some confusion, with many believing that new stablecoin licenses have been granted or that all payment projects will fall under Bank of England supervision. However, a mandate sets priorities, not creates permission.

The new objective will be implemented through amendments to the Financial Services and Markets Bill, which is expected to enter into force on 25 October 2027. The regulation of stablecoins is a complex issue, with multiple bodies involved, including the FCA, the Bank of England, and HM Treasury.

The Bank of England has already published a policy statement on sterling-denominated systemic stablecoins, and a code of practice is expected to be finalized by the end of 2026. However, many questions remain unanswered, including which offerings will be considered qualifying and systemically important stablecoins, and what requirements will apply to reserves, custody, and redemption.