UK Treasury Proposes Bank of England Mandate for Digital Innovation

The proposed mandate extends the Bank’s existing responsibilities regarding central counterparties to include systemic payment systems, specifically those utilizing digital settlement assets such as stablecoins. City Minister Lucy Rigby noted that distributed ledger technology possesses the potential to fundamentally transform financial markets, framing the new objective as a mechanism to support digital finance without compromising risk controls. Deputy Governor Sarah Breeden expressed support for the initiative, emphasizing that the Bank will maintain its focus on stability while adapting to technological shifts.

To ensure transparency, the Bank would be required to report annually to Parliament, providing lawmakers a recurring platform to monitor how regulatory frameworks evolve alongside new technology. This legislative change, expected to be introduced as an amendment to the Financial Services and Markets Bill during debates on September 7 and 9, positions the UK to compete with international stablecoin regimes, including the U.S. federal framework established in 2025.

Simultaneously, the regulatory environment for digital assets is maturing. The Bank recently replaced restrictive individual transaction limits with a £40 billion issuance cap for systemic stablecoins, allowing issuers to hold 70% of reserves in British government debt. Meanwhile, the Financial Conduct Authority is preparing for the mandatory crypto regime scheduled for October 25, 2027. Firms must submit authorization applications between September 30, 2026, and February 28, 2027, to avoid losing access to transitional market arrangements.