UK Plans New Bank of England Mandate for Stablecoin Oversight

Financial stability would remain the Bank of England’s main responsibility, while the proposed innovation mandate would require the central bank to provide Parliament with annual updates.

Britain is preparing to give the Bank of England a new statutory duty focused on encouraging innovation in stablecoins and other digital forms of money. The proposal would not change the central bank’s primary responsibility for maintaining financial stability.

The government intends to introduce the secondary objective through an amendment to the Financial Services and Markets Bill. Under the plan, the Bank of England would report to Parliament every year on its progress in promoting innovation across payment systems and digital money, according to the Treasury.

The move would formally make payment modernization part of the central bank’s responsibilities. The UK is developing a unified regulatory framework for both conventional and tokenized payments, including stablecoins and tokenized deposits. Officials are also examining how the framework could accommodate payments made by AI agents.

City Minister Lucy Rigby said financial stability would remain the Bank of England’s top priority, while the additional objective would help encourage innovation in payments and digital finance and support Britain’s position as a global financial-services hub, according to the Financial Times.

UK Revises Its Approach to Stablecoin Regulation

In June, the Bank of England abandoned proposed temporary limits on the amount of stablecoins that individuals and businesses could hold. Instead, it introduced a temporary £40 billion ($54 billion) issuance ceiling for each stablecoin considered systemic.

Under the proposed framework, issuers could allocate up to 70% of their reserves to short-term UK government debt, with the remaining reserves held as deposits at the central bank.

Separately, the Financial Conduct Authority has finalized rules for crypto businesses and stablecoin issuers. The framework includes simplified capital requirements introduced following industry feedback. Companies will be able to submit authorization applications from Sept. 30, while the new regulatory regime is scheduled to take effect on Oct. 25, 2027.

The global stablecoin market is worth approximately $303 billion, according to DeFiLlama data, up from around $200 billion at the beginning of last year. Most of the market remains dominated by stablecoins pegged to the U.S. dollar.

Consumer-sized stablecoin transactions below $250 have also expanded significantly. Visa data shows that such transactions increased from about $500 million in 2019 to nearly $70 billion last year, highlighting the growing use of stablecoins for retail payments.

The Treasury had not responded to CoinDesk’s request for comment at the time of publication.