Highlights
- The UK Treasury has formally directed the Bank of England to actively support innovation in digital currencies and payments.
- The move follows criticism that the BoE has been too conservative toward stablecoins and digital money.
- Innovation is explicitly secondary to the central bank's core financial-stability mandate.
- The order builds on a June 2026 draft rulebook for systemic stablecoin issuers and an active digital pound pilot.
The UK government has given the Bank of England a new formal mandate: actively support innovation in stablecoins and digital payments, rather than simply regulate them at arm's length. Bloomberg reported that the Treasury's directive responds to mounting criticism that the central bank has moved too cautiously on digital-asset technology, with Prime Minister Andy Burnham's government pushing to keep London competitive as other financial centers race to build out stablecoin and tokenized-payment infrastructure.
From Gatekeeper to Active Participant
The Bank of England has historically approached stablecoins primarily as a financial-stability risk to be contained, a posture reflected in its June 2026 policy statement and draft Code of Practice for systemic stablecoin issuers, which set out strict capital and custody requirements — including a proposed £40 billion sector-wide ceiling on stablecoin issuance during an initial transition period, alongside per-user holding limits designed to stop a sudden, destabilizing shift of retail deposits out of commercial banks and into stablecoin issuers. Bloomberg's report notes the Treasury has been explicit that this new innovation mandate does not override that stability mission; it sits alongside it, with the central bank now expected to weigh how its rules affect the UK's competitiveness in digital payments, not just the risks those rules are designed to contain.
Why London Wants to Move Faster
The mandate lands as the Bank of England is already mid-pilot on a digital pound project, whose Phase 2 has been testing how commercial stablecoins and central bank digital currency can interoperate in cross-border trade finance, working with partners including Polygon Labs. That combination — a live CBDC pilot plus a new political push for innovation — suggests the UK is trying to avoid a repeat of its experience with open banking and fintech licensing, where slower regulatory timelines pushed some innovation offshore to the EU and US. Other jurisdictions have moved faster on stablecoin-specific frameworks over the past two years, and UK officials appear increasingly concerned that regulatory caution alone, without an explicit innovation mandate, risks ceding ground in a payments infrastructure race that is unlikely to reverse.
Related: Cuomo Warns US Is Falling Behind Europe on Crypto Rules
What to Watch Next
The practical test of this mandate will be whether the Bank of England's forthcoming final rules for systemic stablecoin issuers — expected to build on the June draft — loosen any of the more restrictive elements industry has flagged, such as individual holding caps, and how quickly UK-licensed issuers can bring products to market once the rulebook is finalized. Also worth watching: whether the digital pound's Phase 2 trade-finance testing produces a concrete timeline for wider rollout, since a credible CBDC alongside a workable stablecoin regime is the combination the Treasury appears to be betting will keep London relevant in digital payments. Industry groups that lobbied against the June draft's issuance ceiling will be watching just as closely for signs the new innovation mandate translates into an actual loosening of that cap, rather than remaining a statement of political intent.
