UK Taps Bank of England's Potential for Stablecoin Innovation

The Bank of England has long been seen as a cautious institution, tasked with preventing financial system blowups. However, the British government is changing that instinct by giving the Bank a new 'secondary objective' to actively support innovation in payments and digital money.

This includes stablecoins, which have been gaining traction globally. The new objective will be written into law through an amendment to the Financial Services and Markets Bill, set for debate next month.

The government's move follows a year of loosening restrictions on stablecoins in Britain. In June, the Bank scrapped proposed limits on individual and business holdings, replacing them with a £40 billion cap on total issuance.

Part of the driving force behind this shift is the UK's desire to stay competitive as digital finance evolves. The US has swung sharply crypto-friendly, and the UK doesn't want payments innovation and related businesses to drift elsewhere.

However, there's tension in asking a financial-stability regulator to champion innovation. It puts two impulses, stability and growth, at odds within the same body. The government maintains that stability stays primary while innovation is secondary, with annual reporting as a check.