Tokenisation, DLT and stablecoins are gaining greater attention as the UK moves to strengthen its framework for payments innovation.
The UK government plans to give the Bank of England a new secondary objective to support innovation in payment systems and digital money, while keeping financial stability as its primary objective.
The new mandate is designed to help UK payments regulation keep pace with technological developments, including tokenisation, distributed ledger technology (DLT), and digital settlement assets such as stablecoins. The Bank will report annually on its progress against the objective.
The government said the change forms part of broader efforts to modernise the UK payments sector, encourage new financial technologies, and strengthen the country’s position as a global financial centre. The approach will extend an existing innovation objective that applies to the Bank’s regulation of central counterparties and central securities depositories.
Bank of England Deputy Governor for Financial Stability Sarah Breeden welcomed the move, saying the new objective would support innovation across financial services without compromising financial stability. City Minister Lucy Rigby similarly highlighted the potential of tokenisation and DLT to transform financial markets.
Why does it matter?
Payments infrastructure is becoming increasingly important to the competitiveness of financial centres as technology changes how money and financial assets are transferred. A clearer regulatory focus on innovation could give banks and fintechs greater scope to develop new payment models while providing more certainty around the rules governing them. For the United Kingdom, an important policy task will be to support technological progress without weakening the safeguards needed to maintain confidence in the financial system.
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