UK Writes Bank of England’s Stablecoin Softening Into Law With New Innovation Duty

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The UK government said Thursday it will give the Bank of England a new statutory duty to support innovation in payment systems, including stablecoins, through amendments to the Financial Services and Markets Bill now before the House of Lords.

Financial stability remains the Bank’s primary objective, City Minister Lucy Rigby said in the announcement.

“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.”

Deputy Governor Sarah Breeden said the change would “further support” work already under way “to maintain trust and drive innovation in UK payments.”

• The new duty extends a power the Bank has held since 2023 for clearing houses and securities depositories to cover payment systems for the first time, explicitly including stablecoins and other “digital settlement assets.”
• It follows the Bank’s decision in June to drop a proposed cap on how much of a stablecoin any one person could hold, replacing it with a £40 billion issuance ceiling per systemic issuer.
• The Bank must report to Parliament each year on how it is using the new objective, and financial stability stays its primary duty throughout.

A year of loosening, now written into law

The mechanics are modest. What matters is the pattern this caps off. The Bank’s position on stablecoins has moved one way for ten months. It proposed the personal holding cap last November, then by May was said to be preparing to soften its own proposals, which it had reportedly judged too strict.

By June it had replaced the cap outright, and in July it published a joint, lighter-touch supervisory approach with the Financial Conduct Authority built on that same guardrail.

• 10 Nov 2025: Bank of England floated a £20,000 personal holding cap for regulated stablecoins.
• 14 May 2026: Reports indicated the Bank was preparing to soften its stablecoin limits, though the reversal was not yet confirmed.
• 24 Jun 2026: The Bank dropped individual holding caps and instead proposed a £40 billion per-issuer ceiling, while allowing interest-bearing backing assets to rise from 60% to 70%.
• 2 Jul 2026: The Bank of England and FCA published a joint, lighter-touch regulatory approach for systemic stablecoin issuers, building on the June framework.
• 27 Aug 2026: Parliament gave the Bank a statutory duty to support payments innovation, extending its existing innovation objective to payment systems, including stablecoins.

The Bank of England’s stablecoin policy has progressively shifted away from restrictive individual limits toward a broader framework focused on issuer-level safeguards and payments innovation.

Thursday’s change gives that direction a legal footing it didn’t have before. The Bank has held a narrower version of this innovation duty since 2023, covering only clearing houses and securities depositories. Parliament is now extending the same logic to payment systems, echoing the competitiveness and growth objective it gave the Prudential Regulation Authority and Financial Conduct Authority that same year.

Once it is in statute, weighing innovation on stablecoins stops being a discretionary choice by the current Bank leadership and becomes something future officials answer for in an annual report to Parliament. The Bill, now at report stage, in the House of Lords, is scheduled for further debate on 7 and 9 September.