The UK government plans to give the Bank of England a secondary objective to support innovation in systemic payment systems and emerging forms of digital money, including systems that use stablecoins as settlement assets.
The proposal does not displace the Bank’s primary financial-stability objective. HM Treasury said the innovation objective would rank below stability, and would not require the Bank to support an innovation where doing so could undermine the resilience of the financial system.
The distinction matters. The announcement is a proposed change to the Bank’s regulatory remit, not approval of a stablecoin, a new payment rail or any particular business model. The government said it expects to implement the change by amending the Financial Services and Markets Bill, which is scheduled for further House of Lords debate on September 7 and 9.
A mandate aimed at systemic payment regulation
The Bank supervises critical financial-market infrastructure, including systemic payment systems, central counterparties and central securities depositories. It already has a secondary innovation objective for its regulation of central counterparties and central securities depositories under the Financial Services and Markets Act 2023.
The planned reform would extend that approach to systemic payment systems, including those using digital settlement assets. It should not be read as a general instruction covering every payment service provider, merchant acquirer or fintech in the UK, nor as a replacement for the separate mandates of other financial regulators.
City Minister Lucy Rigby said tokenisation and distributed-ledger technology could transform financial markets, while stressing that financial stability would remain the Bank’s primary objective. Sarah Breeden, the Bank’s deputy governor for financial stability, welcomed the announcement and said it would support innovation without compromising stability.
Annual reporting creates an accountability mechanism
The government said the Bank would report to Parliament each year on how it was advancing the objective. That creates a formal accountability channel, but the announcement does not specify the performance measures Parliament will receive.
That omission will matter when the objective moves from legislation to supervision. Counting consultations, sandbox projects or technical experiments would show activity, but not necessarily whether regulated infrastructure became more interoperable, resilient or accessible. Equally, faster approvals would not by themselves show that liquidity, redemption, operational-resilience and settlement risks were properly controlled.
For payment operators, the most useful reporting would distinguish between proposals, tests and production deployment; explain how the Bank evaluated new risks; and show whether innovation reduced concentration or introduced new common dependencies. The government has not said that such metrics will be required, so these are practical tests for the eventual reporting framework rather than announced policy.
The core tension remains stability versus market development
A secondary innovation objective can change how regulatory trade-offs are documented without dictating their outcome. The Bank may need to explain not only how it protects financial stability, but also whether its rules leave workable paths for new settlement designs to be tested and adopted safely.
Stablecoin-based infrastructure illustrates the tension. A token can move on new technology while still depending on conventional controls around reserves, redemption, governance, financial crime, cyber security and operational continuity. Supporting innovation does not settle who performs those functions or how failures are contained.
The proposal therefore raises a governance question more than a product question: can the Bank demonstrate that it is open to credible new payment infrastructure while preserving clear, enforceable safeguards? The statutory hierarchy answers part of that question by keeping financial stability first. The legislation, implementing approach and annual reports will determine how much practical weight the new objective carries.