Hottest
Crypto
UK Government to Hand Bank of England New Stablecoin Innovation Mandate
AL
Alice Morgan
3 weeks ago
The UK government is preparing to formally task the Bank of England with a new legal duty to foster stablecoin innovation, according to reports from Whitehall sources. The move, which would be a landmark in British financial regulation, is expected to be announced as part of a broader package of reforms aimed at positioning the UK as a global hub for digital assets. The new mandate would require the central bank to actively support the development of stablecoins — digital currencies pegged to traditional assets like the pound or dollar — while ensuring they meet rigorous standards of safety and resilience.The decision comes after months of consultation between the Treasury, the Financial Conduct Authority (FCA), and the Bank of England. Officials have been grappling with how to regulate a sector that has grown rapidly but remains largely unregulated in the UK. The new duty would sit alongside the Bank's existing responsibilities for monetary and financial stability, and is seen as a way to give the central bank a clear, proactive role in shaping the future of money. A Treasury spokesperson said the government is "committed to creating a regulatory environment that enables innovation while protecting consumers and maintaining financial stability," though they declined to comment on the specifics of the reported mandate.Industry reaction has been broadly positive, with many in the crypto sector viewing the move as a signal that the UK is serious about becoming a leader in digital finance. "This is a significant step forward," said a senior executive at a London-based stablecoin firm. "It shows the government understands that stablecoins are not just a niche product but a foundational piece of the future financial system." However, some critics have expressed caution, warning that giving the Bank of England a dual mandate to both promote and regulate could create conflicts of interest. "The Bank's primary job is to ensure stability," said a former central bank official. "If it is also tasked with promoting innovation, it may be tempted to take on more risk than is prudent."The new mandate is expected to be enshrined in legislation later this year, possibly as part of the Financial Services and Markets Bill, which is currently making its way through Parliament. The bill has already been amended to include provisions for a regulatory framework for stablecoins, and the new duty would build on that foundation. Under the proposed framework, the Bank of England would oversee systemic stablecoins — those that could pose a risk to financial stability — while the FCA would regulate the broader market. The Bank would also be responsible for setting standards for the technology underpinning stablecoins, including the use of distributed ledger technology.The UK's push on stablecoins comes amid a global race to regulate digital assets. The European Union has already passed the Markets in Crypto-Assets (MiCA) regulation, which provides a comprehensive framework for stablecoins and other crypto assets. The United States, meanwhile, has been slower to act, with federal agencies still debating how to classify and regulate the sector. The UK's approach, which combines a clear legal mandate with a focus on innovation, is being closely watched by other jurisdictions. "The UK is positioning itself as a middle ground between the EU's heavy-handed regulation and the US's fragmented approach," said a financial policy analyst. "If it works, it could become a model for other countries."For the Bank of England, the new mandate would represent a significant expansion of its remit. The Bank has traditionally been cautious about digital currencies, with Governor Andrew Bailey repeatedly warning about the risks of crypto assets. However, the Bank has also been exploring the potential of a central bank digital currency (CBDC), the digital pound, which is currently in the design phase. The new stablecoin mandate would complement that work, giving the Bank a broader toolkit to shape the future of money. "The Bank is not trying to stifle innovation," said a source familiar with the Bank's thinking. "It wants to ensure that innovation happens in a way that is safe and sustainable."The announcement is expected to be welcomed by the crypto industry, which has been lobbying for clearer rules for years. Many firms have complained that the lack of regulatory clarity has driven business overseas, particularly to Singapore and Switzerland. The new mandate could help reverse that trend, providing a clear signal that the UK is open for business. "This is exactly what we've been asking for," said the CEO of a UK-based crypto exchange. "We want to innovate, but we need to know the rules of the game. This gives us that."However, the road ahead is not without challenges. The Bank of England will need to develop the technical expertise to oversee a rapidly evolving sector, and there are questions about how it will coordinate with the FCA and other regulators. There is also the risk that the new mandate could be seen as a green light for risky practices, if not implemented carefully. "The devil is in the details," said a regulatory lawyer. "The Bank will need to strike the right balance between encouraging innovation and protecting the financial system."Looking ahead, the new mandate is likely to be a key topic at the upcoming Global Financial Innovation Summit, which will be held in London later this year. The summit, which brings together regulators, policymakers, and industry leaders, is expected to focus on the future of digital finance. The UK government has made no secret of its ambition to be a global leader in this space, and the new stablecoin mandate is a clear step in that direction. Whether it will be enough to attract the world's leading crypto firms remains to be seen, but the signal is unmistakable: the UK is serious about stablecoins.
Stay Informed. Act Smarter.
Get weekly highlights, major headlines, and expert insights — then put your knowledge to work in our live prediction markets.
Comments
It's quiet here...Start the conversation by leaving the first comment.