UK Government Hands Bank of England New Fintech Mandate

Key Points

• HM Treasury will give the Bank of England a new “secondary objective” to support innovation in payment systems and digital money, including stablecoins.
• The change aims to keep financial regulation in step with rapid developments in payments technology.
• The move follows a difficult period for the Bank, which revised its initial stablecoin proposals after strong opposition from the payments industry.
• The Bank initially proposed strict limits on individual stablecoin holdings and high capital requirements before scaling back both measures.
• Under the revised approach, total issuance of each stablecoin will be capped at £40 billion instead of the tighter individual holding limits first proposed.
• The Bank has also eased its rules on backing assets, increasing the permitted share held in short-term government debt from 60% to 70%.
• The Bank of England will report to Parliament each year on its progress towards the innovation objective.
• City Minister Lucy Rigby said financial stability will remain the Bank’s primary objective, with innovation serving as a supporting goal.
• Rigby said technologies such as tokenisation could transform financial markets and help the UK remain a global leader in financial services.

London (Britain Today News) August 27, 2026 — The UK Government has announced plans to hand the Bank of England a new secondary objective requiring it to support innovation in payment systems and digital money, including stablecoins, in a move aimed at ensuring financial regulation does not fall behind the pace of technological change. HM Treasury confirmed that the proposed mandate would sit alongside the Bank’s existing responsibilities, with the central bank required to report annually to Parliament on the progress it has made in advancing innovation across payments and digital finance.

What New Mandate Has the Treasury Proposed for the Bank of England?

The core of the announcement is straightforward: HM Treasury intends to give the Bank of England a formal secondary objective focused specifically on supporting innovation in payment systems and digital money. This includes emerging areas such as stablecoins, tokenised assets and other forms of digital finance that have grown rapidly in recent years but have not always been matched by regulatory clarity.

According to HM Treasury, the new objective is intended to make sure that regulation “keeps pace with changes in payments technology” rather than lagging behind industry developments, as has arguably been the case in the past. This is not a replacement for the Bank’s core responsibilities but an additional layer of accountability, specifically targeted at the innovation agenda within payments and digital money.

Why Has the Government Decided to Act Now?

The timing of the announcement is closely tied to recent friction between the Bank of England and the payments industry over how stablecoins should be regulated. Industry participants had raised concerns that the Bank’s initial approach risked stifling growth in a sector the government has repeatedly said it wants the UK to lead globally.

By introducing a secondary objective focused on innovation, the government appears to be signalling that regulators must weigh the practical impact of their rules on the competitiveness of UK payments and digital finance firms, not simply the risks associated with new technology. The move can be read as an attempt to rebalance the regulatory conversation, ensuring that innovation is given formal, reportable weight rather than being treated as an informal consideration.

What Did the Bank of England’s Original Stablecoin Proposals Involve?

Before the revisions, the Bank of England had put forward a set of proposals for regulating stablecoins that proved highly controversial within the industry. The original plans included low caps on individual stablecoin holdings, alongside capital requirements that many in the sector regarded as overly burdensome.

These proposals were widely criticised by payments firms and digital asset businesses, who argued that such restrictive limits would make it difficult for stablecoins to be used at meaningful scale within the UK, potentially pushing innovation and business activity towards other jurisdictions with more accommodating regimes.

How Did the Bank of England Revise Its Stablecoin Rules After Industry Pushback?

Facing sustained criticism, the Bank of England was ultimately forced to row back on several elements of its original stance. The revisions represent a significant softening of the initial approach, though the Bank has maintained a degree of caution in how far it has been willing to go.

What Changed on Stablecoin Issuance Limits?

Rather than the tighter individual holding caps first proposed, the Bank has opted instead to limit total issuance per stablecoin to £40 billion. This shift moves the focus from restricting how much any individual holder can keep to capping the overall size of a given stablecoin in circulation, a change that industry figures are likely to view as more workable in practice.

What Changed on Backing Asset Requirements?

The Bank also relaxed its position on the assets that must back stablecoins. The share of backing assets that can be held in short-term government debt has been increased from 60% to 70%, giving issuers greater flexibility in how they structure their reserves while still requiring a substantial buffer of low-risk assets.

What Will the Bank of England Be Required to Report to Parliament?

Under the new regime set out by HM Treasury, the Bank of England will be required to report annually to Parliament on how it is advancing the innovation objective. This reporting requirement is designed to build in a degree of transparency and accountability, ensuring that the Bank’s progress on supporting innovation in payments and digital money is regularly scrutinised by lawmakers rather than left as a background policy aim.

This annual reporting mechanism mirrors the kind of accountability structures already used for other regulatory objectives, and suggests the government wants innovation to be treated as a measurable, trackable priority rather than a vague aspiration.

What Has City Minister Lucy Rigby Said About the Changes?

City Minister Lucy Rigby has been the government’s principal voice on the announcement, framing it as a natural evolution of the Bank’s role in an era of rapid technological change in finance. Rigby said developments in digital payments technology, including tokenisation, had the potential to transform financial markets.

Setting out how the new objective would sit alongside the Bank’s existing duties, Rigby stated:

“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, ensuring that the UK remains a global leader in financial services.”

Her comments make clear that the government is keen to present the change as complementary rather than competing with the Bank’s core mandate, positioning financial stability as the unshakeable priority while innovation is given a formal, though secondary, place in the Bank’s remit.

How Will the Secondary Objective Affect the Bank’s Primary Responsibilities?

A key question raised by the announcement is how a secondary objective focused on innovation will interact with the Bank of England’s primary responsibility for financial stability. Based on the government’s own framing, the answer appears to be one of hierarchy rather than replacement: financial stability remains paramount, with the innovation objective operating underneath it.

In practice, this suggests the Bank will continue to prioritise stability-focused decisions where the two goals come into tension, but will now be expected to actively demonstrate — through its annual reporting to Parliament — that it is also taking meaningful steps to support innovation within that constraint.

What Does This Mean for Stablecoin Issuers and Digital Money Firms?

For companies operating in the stablecoin and digital money space, the combination of the revised issuance caps, the increased flexibility on backing assets, and the new innovation-focused mandate for the Bank of England represents a materially different regulatory environment to the one first proposed.

The shift from individual holding caps to a £40 billion total issuance limit per stablecoin, together with the higher permitted share of short-term government debt as backing, gives issuers more room to plan around a stable, more predictable set of rules. The introduction of a secondary objective on innovation may also encourage firms to engage more directly with the Bank of England, given that it is now formally required to account for how its regulatory approach supports rather than hinders innovation.
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How Does This Fit Into the UK’s Wider Digital Finance Strategy?

The announcement reflects a broader ambition, repeated by government ministers including Lucy Rigby, for the UK to remain a global leader in financial services as digital finance technologies mature. Tokenisation, stablecoins and related innovations are increasingly seen by policymakers as central to the future of financial markets, rather than niche or peripheral developments.

By embedding an innovation objective directly into the Bank of England’s mandate, the government is attempting to align the country’s most influential financial regulator with this strategic direction, rather than leaving innovation policy to sit solely with HM Treasury or other bodies.

What Happens Next?

With the secondary objective now proposed, attention will turn to how quickly it is formally implemented and how the Bank of England chooses to interpret its new reporting obligations. The first annual report to Parliament on the Bank’s progress in advancing the innovation objective will be closely watched, both by lawmakers assessing whether the policy is working as intended and by industry participants keen to see whether the more accommodating approach to stablecoin regulation persists in practice.

For now, the government’s message is one of balance: a Bank of England that continues to safeguard financial stability above all else, but which is now formally tasked with ensuring that safeguarding does not come at the cost of the UK’s ambitions in payments and digital finance innovation.