Britain gives its central bank a duty to help digital money grow — what a stablecoin rulebook is actually for

The UK Treasury said this week that it will hand the Bank of England a new legal duty to support innovation in payment systems and digital money, a change aimed squarely at stablecoins. Financial stability remains the Bank's primary responsibility and the new objective sits below it, but the Bank will have to report to Parliament every year on how it is advancing the goal.

The duty arrives as an amendment to the Financial Services and Markets Bill, which faces further debate in the House of Lords on September 7 and 9, and it extends an approach already used for the institutions that clear and settle financial trades. City Minister Lucy Rigby said tokenisation and distributed ledger technology have the potential to transform financial markets globally, and framed the objective as keeping the UK competitive in financial services. Sarah Breeden, the Bank's deputy governor for financial stability, welcomed the change.

The move follows sustained complaints from crypto firms that the Bank has been too cautious. Some of that pressure has already landed. When the Bank published its rules for sterling-pegged tokens in June, it dropped proposed caps on how much of a stablecoin one person or business could hold — figures of 20,000 pounds for individuals and 10 million for businesses had been floated — and replaced them with a temporary 40 billion pound limit on total issuance. It also reduced the share of backing assets that issuers must park in accounts at the central bank that pay no interest, though systemic issuers still face a requirement of at least 30 percent, a threshold the industry argues determines whether a sterling stablecoin business can make money at all.

For anyone new to the term, a stablecoin is a token designed to hold a steady value by tracking something else, usually a national currency, and it is backed by reserves the issuer holds for that purpose. Roughly 99 percent of stablecoins in circulation are denominated in dollars, according to the Bank's executive director for financial market infrastructure, Sasha Mills, which leaves sterling tokens a sliver of a market the Bank now wants to grow; applications from would-be issuers of systemic sterling stablecoins are due to open by the end of the year. Mills has described stablecoins as a new form of money that must be made equally robust as every other form. Britain is not alone here: the EU has regulated stablecoin issuers under its MiCA regime since 2024, and the United States followed with the GENIUS Act.

None of this changes anything for holders today — it is a proposal still working its way through Parliament. But the reason to pay attention is that rules like these decide what actually sits behind the token in your wallet and who has to answer if it stops holding its value. A stablecoin is only as steady as its reserves and the rules governing them, so before you park money in one, it is worth knowing who issues it, what backs it, and which regulator, if any, is watching. This is information, not advice.