Key facts
- The UK Treasury has introduced a new secondary objective for the Bank of England focused on innovation.
- This move reflects government frustration with the slow pace of the UK's payments system overhaul.
- Industry insiders believe the objective is intended to accelerate progress, particularly regarding stablecoins.
- The Bank of England's deputy governor, Sarah Breeden, oversees payments innovation.
- The UK has been criticized for falling behind other jurisdictions in establishing regulatory regimes for digital assets.
The UK Treasury has introduced a new secondary objective for the Bank of England, focusing on innovation within the nation's payments system. This move signals government frustration with the perceived slow pace of the Bank's overhaul of the UK's payments infrastructure, particularly concerning the development and regulation of stablecoins.
Industry insiders suggest that the addition of this innovation objective to the Bank's mandate is a direct response to a lack of progress on the National Payments Vision, which aims to position the UK as a leader in next-generation payment technologies. Critics have long pointed to the Bank's cautious approach, with fintech bodies warning that prescriptive rules could hinder London's potential as a global hub for stablecoins.
While Bank of England Governor Andrew Bailey has moderated some of his earlier hawkish comments on stablecoins, concerns about the speed of regulatory development persist. The complexity of the stakeholder landscape, with diverse and sometimes opposing views, has been cited as a factor contributing to delays. The introduction of a sterling-denominated systemic stablecoin is considered a key component of the government's broader payments strategy.
Sarah Breeden, the Bank's deputy governor for financial stability, is responsible for overseeing payments innovation. However, some industry sources suggest she may favor tokenized deposits over stablecoins, a view that aligns more closely with the traditional banking model. Breeden has previously stated that the case for stablecoins in domestic UK payments is weaker, though she also indicated that the UK would be open to applications from stablecoin issuers by the end of the year.
The Treasury stated that the new objective reflects broader government efforts to modernize UK payment regulation and support innovation, emphasizing it is not a reaction to a single recent event. The Payments Association's CEO, Emma Banymandhub, views the new objective positively, believing it allows the Bank to overlay a more flexible lens onto its primary financial stability mandate.