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HM Treasury confirmed on August 27, 2026 that the Bank of England will be given a secondary statutory objective to support innovation in payment systems and digital money, explicitly including stablecoins. Financial stability remains the Bank's primary responsibility.
The change arrives through an amendment to the Financial Services and Markets Bill, which returns to the House of Lords for debate on September 7 and 9. The Bank will be required to report to Parliament annually on how it is advancing the objective.
The mechanism is not new, only its scope. The Bank already holds a secondary innovation objective for central counterparties and central securities depositories under the Financial Services and Markets Act 2023, and this extends the same duty to systemic payment systems using digital settlement assets.
"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." - Lucy Rigby, City Minister
Key Takeaways
- The Treasury confirmed the objective on August 27, covering payment systems using digital settlement assets.
- Financial stability remains primary, so the duty ranks below rather than alongside it.
- The Bank must report to Parliament annually on progress against the innovation objective.
- It extends an existing 2023 mechanism previously applied to clearing houses and securities depositories.
- Systemic sterling stablecoins carry a £40 billion issuance cap per token under rules published in June.
What the Objective Changes
A secondary objective is a legal instruction about how a regulator exercises discretion, not a mandate that overrides its primary duty. The Bank will still be required to protect financial stability first, and the new duty shapes how it regulates where stability considerations allow room.
The reporting requirement is what gives it force. An annual account to Parliament creates a public record against which the Bank can be measured, which is a different accountability structure from a general statement of policy intent.
The wording matters for scope. The objective covers systemic payment systems including those using digital settlement assets, which is Treasury shorthand for tokenised money used in settlement, meaning stablecoins and tokenised deposits are written directly into the Bank's innovation duty.
The precedent behind it is established. The Financial Services and Markets Act 2023 introduced the same construction for central counterparties and central securities depositories, so the legal machinery has been tested on other financial market infrastructure.
The Rules It Sits On Top Of
The Bank published its framework for systemic sterling stablecoins in June, and the substance has already shifted once under industry pressure. Proposed limits on individual and business holdings were dropped and replaced with a temporary issuance cap of £40 billion per systemic stablecoin.
The reserve requirements set the economics. At least 30% of backing assets must be held as non-interest-bearing deposits at the Bank, with issuers permitted to hold up to 70% in short-term UK government debt.
That split is restrictive by international comparison. A third of reserves earning nothing is a materially different revenue profile from frameworks permitting full allocation to yield-bearing instruments, which is the structure most US and EU issuers operate under, a divide we map in our stablecoin infrastructure landscape.
The consultation is still open. The Bank is taking comments on its draft Code of Practice until September 22 and plans to finalise it by the end of 2026, with applications from would-be systemic issuers due to open by year end.
Why This Matters for Stablecoins
The competitive context explains the timing. MiCA has applied to stablecoin issuers in the EU since 2024, the US enacted the GENIUS Act last year, and the UK's own final rules do not operate until October 2027, which leaves Britain visibly behind on a market it wants to host.
Sterling's position in that market is negligible. Roughly 99% of stablecoins in circulation are dollar-denominated, and Bank executive director Sasha Mills has acknowledged that sterling tokens are a sliver of the total.
The objective is aimed at that gap rather than at any specific issuer. Writing innovation into the Bank's statutory duties signals to prospective issuers that regulatory caution has a legal counterweight, which is a different proposition from the framework as it stood in June.
Whether it changes issuer behaviour is a separate question. A £40 billion cap with 30% of reserves earning nothing is a firmer constraint than the objective is a loosening, and the US framework's own implementation delays show how far statutory intent sits from operating rules, as we tracked in our GENIUS Act rulemaking analysis.
What Comes Next
The Lords debate on September 7 and 9 is the immediate step. The amendment has to pass through the remaining stages of the Financial Services and Markets Bill before the objective takes legal effect.
The Code of Practice consultation closes September 22, with finalisation targeted for the end of 2026. Those rules will determine what systemic issuers actually have to do, which matters more operationally than the objective itself.
Applications open by year end. The first cohort of prospective systemic sterling stablecoin issuers will show whether the framework attracts genuine interest or whether the reserve and cap constraints deter it, in a market where reserve composition and disclosure increasingly separate issuers, as we set out in our stablecoin issuer transparency index.
The Bank has continued technical work alongside the policy. Its Digital Pound Lab tested in August whether a stablecoin and a simulated digital pound could be used together in a cross-border trade payment, using simulated funds without real customers or money.
Conclusion
Giving a central bank a legal duty to support stablecoin innovation is a notable shift in posture for an institution that has approached the category with visible caution. It formalises something ministers have been saying informally for two years.
The limits are equally clear in the drafting. Secondary means secondary, financial stability still overrides, and the objective changes how the Bank weighs decisions rather than what it is allowed to permit.
The test is whether it shows up in the rules. The Code of Practice due by year end and the first issuer applications will demonstrate whether the innovation duty has practical weight, or whether it operates mainly as a signal to a market that has so far built elsewhere.
FAQ:
1. What did the UK government announce?
HM Treasury confirmed on August 27, 2026 that the Bank of England will receive a secondary statutory objective to support innovation in payment systems and digital money, explicitly including payment systems using digital settlement assets such as stablecoins. Financial stability remains the Bank's primary objective.
2. How will the objective be introduced?
Through an amendment to the Financial Services and Markets Bill, which returns to the House of Lords for debate on September 7 and 9, 2026. Once in force, the Bank will be required to report to Parliament annually on how it is advancing the objective.
3. Does this override financial stability?
No. The innovation duty is explicitly secondary, meaning the Bank's primary responsibility to protect UK financial stability continues to take precedence. The objective shapes how the Bank exercises regulatory discretion where stability considerations allow, rather than compelling any particular outcome.
4. What are the UK's current stablecoin rules?
The Bank published its framework for systemic sterling stablecoins in June 2026, setting a temporary issuance cap of £40 billion per systemic stablecoin after dropping earlier proposed limits on individual holdings. At least 30% of reserves must be held as non-interest-bearing deposits at the Bank, with up to 70% permitted in short-term UK government debt.
5. When can issuers apply?
Applications from would-be issuers of systemic sterling stablecoins are due to open by the end of 2026. The Bank is consulting on its draft Code of Practice until September 22 and plans to finalise it by year end, while the UK's broader FCA rules do not operate until October 2027.
Disclaimer:
This content is provided for informational and educational purposes only and does not constitute financial, investment, legal, or tax advice; no material herein should be interpreted as a recommendation, endorsement, or solicitation to buy or sell any financial instrument, and readers should conduct their own independent research or consult a qualified professional.
