Bank of England given powers to support digital pound and other ‘innovative payments’
Key Points
- The government will give the Bank of England a secondary objective to support payments innovation.
- Financial stability remains the Bank's primary objective and takes precedence.
- The objective covers systemic payment systems, including those settling in stablecoins.
- The Bank will report to Parliament annually on its progress.
- Amendments to the Financial Services and Markets Bill go to the Lords on 7 and 9 September.
The government has given the Bank of England a new secondary objective to support innovation in payment systems and emerging forms of digital money.
City Minister Lucy Rigby set out the change on Thursday (27 August).
The objective will sit below the Bank’s primary objective of protecting and enhancing UK financial stability, and it will not require the Bank to support innovation where that would undermine stability.
“Developments in digital payments technology, including tokenisation and DLT, have the potential to transform financial markets across the globe,” said Lucy Rigby, City Minister.
“Whilst financial stability will always remain the Bank’s primary objective, this secondary objective will support the Bank to continue to drive innovation in payments and digital finance, ensuring that the UK remains a global leader in financial services.”
The Bank of England supervises the infrastructure that sits behind everyday transactions and financial trades, covering:
- Systemic payment systems
- Central counterparties, which sit between the two sides of a trade
- Central securities depositories, which hold and settle securities
A secondary innovation objective already applies to the Bank’s regulation of central counterparties and central securities depositories, introduced through the Financial Services and Markets Act 2023.
The reform extends that same approach to systemic payment systems, including those that settle in digital assets such as stablecoins.
Stablecoins are digital tokens designed to hold a steady value, usually tracking a currency such as the pound or the dollar.
The Bank will report to Parliament every year on how it has advanced the innovation objective, giving a public measure of whether payments regulation is keeping pace with the technology.
“We welcome today’s announcement, which will further boost our work to support innovation in financial services without compromising on financial stability,” said Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England.
“The Bank is doing a huge amount, together with government and other authorities, to maintain trust and drive innovation in UK payments. This new secondary objective will further support that.”
The government expects to implement the change through amendments to the Financial Services and Markets Bill.
