The UK is set to put stablecoins at the center of a new Bank of England mandate aimed at supporting innovation in digital payments.
The government plans to give the Bank of England, the UK’s central bank, a secondary objective to support innovation in payment systems and emerging forms of digital money, HM Treasury said. announcement Thursday
The mandate will cover payment systems that use digital settlement assets such as stablecoins, while financial stability will remain the BoE’s primary objective.
The proposal comes as the UK works on stablecoins through regulatory changes, payments testing and closer coordination with the US.
BoE innovation mandate faces September debate
The new responsibilities will expand an existing system used to regulate central counterparties (CCPs) and central securities depositories (CSDs), which help clear, hold and settle financial assets.
Under the proposed changes, the central bank will report annually to Parliament on its progress towards payment innovation objectives.
“Developments in digital payment technologies, including tokenization and DLT (distributed ledger technology), have the potential to transform global financial markets,” City Minister Lucy Rigby said.
The government hopes to implement the objective through amendments to the Financial Services and Markets Bill, which is scheduled for further debate in the House of Lords on 7 and 9 September.
Stablecoin regulations still face industry concerns
The impact of the new mandate may depend on how the BoE uses its annual reporting requirements, Maksim Sakharov, co-founder and CEO of on-chain banking infrastructure provider WeFi, told Cointelegraph.
“The objective is secondary to financial stability, so it does not override anything, but the bank must publish an annual account of its innovation efforts in the field of payments and digital money,” Sakharov said. This requirement could lead to greater public scrutiny of the stablecoin rules the central bank finalized in June.
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Sakharov pointed to the requirement for systemic stablecoin issuers to hold at least 30% of their backing assets in non-interest-bearing deposits with central banks.
“The first thing to fix is the reserve allocation,” he said, adding that requirements can determine whether a stablecoin business is commercially viable.
The UK is stepping up its stablecoin push
The new order follows the UK’s growing efforts to link crypto assets designed to maintain a stable value by tracking assets such as stablecoins, or the US dollar.
In August, a team participating in the Bank of England’s Digital Pound Lab began testing whether a stablecoin and a simulated digital British pound could work together in cross-border trade payments. The test platform does not use real customers or money.
Related: Revolut Launches Euro Stablecoin in 3 European Markets
In mid-July, UK and US published A joint statement on stablecoins, in which governments said they “want to enable the use of stablecoins in cross-border financing” and called for greater alignment of their regulatory frameworks.
The BoE had earlier scrapped plans to limit stablecoin holdings to 20,000 British pounds for individuals and 10 million pounds for businesses, replacing it with a temporary 40 billion pound ($52.9 billion) issue cap for each systemic stablecoin.
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