UK Hands Bank of England Duty to Foster Stablecoin Innovation

The Bank of England is set to receive a new legal duty to promote innovation in payments and digital money, specifically stablecoins. This move follows sustained criticism from crypto firms accusing the central bank of an overly conservative approach to digital assets. The Treasury has proposed an amendment to the Financial Services and Markets Bill, which will give the Bank a secondary statutory objective covering payment systems and digital money.

The new duty is subordinate to the Bank's primary responsibility for financial stability, but it requires the Bank to report annually on its progress. This shift is seen as a significant step forward in supporting innovation in payments and digital finance, with City Minister Lucy Rigby stating that 'tokenization and distributed ledger technology could transform financial markets'. The objective follows sustained pressure from crypto firms, which have accused the Bank of being too cautious.

The Bank has already taken steps to make sterling-pegged tokens commercially viable, dropping planned caps on stablecoin ownership and reducing the share of backing assets that issuers must park at the central bank. Sarah Breeden, Deputy Governor for Financial Stability, welcomed the new objective, stating 'the Bank is doing a huge amount...to maintain trust and drive innovation in UK payments'. The move comes amid mounting global competition on stablecoins, with the EU's MiCA regime already in force.