UK Bank Backs Stablecoins: Faster, Cheaper Payments Ahead?

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Bank of England Backs Stablecoins and Tokenized Finance

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The UK’s push for tokenized finance stems from a need to adapt to expanding digital finance to maintain regulatory oversight.
Inadequate modernization of payment infrastructure could lead to financial activity moving outside regulatory control.
The Bank of England is working to develop stablecoin rules and expand tokenized finance infrastructure to promote competition and efficiency.

This week, the Bank of England showed increased support for digital payments. Officials detailed plans to integrate stablecoins and digital versions of bank deposits into the UK’s financial system. At a London event called City Week 2026, Deputy Governor Sarah Breeden explained that various types of digital money – including regulated stablecoins and a potential digital pound – could work alongside current payment methods.

According to Breeden, using tokenized finance could speed up payments and lower costs for businesses and individuals. She explained that technologies like shared digital records and smart contracts could also streamline payments by automating certain steps. The Bank of England has also announced it will keep working on regulations for stablecoins and build out the infrastructure needed for tokenized finance to grow.

UK pushes ahead with tokenized finance

As a researcher following developments in the UK financial sector, I’ve been observing the Bank of England’s increasing focus on adapting to the growth of digital finance. A key concern, as highlighted by Sarah, is the potential for financial activity to slip outside of current regulations if we don’t update our payment systems. That’s why the Bank is actively collaborating with the Financial Conduct Authority and industry partners to build the next generation of UK payment infrastructure.

The central bank is also aiming to increase competition in how people make digital payments. In the future, people might be able to use things like stablecoins and digital versions of bank deposits – in addition to regular bank money – for everyday purchases. According to Breeden, all these different types of digital money need to be easily convertible to one another to maintain confidence and keep the financial system stable.

The Bank is planning to publish initial rules for major stablecoins next month, with the final rules expected later in the year. They’ve already begun reconsidering previous proposals after receiving feedback from companies in the cryptocurrency and digital asset space. A previous version of the plan included a limit of £20,000 on how much of a single UK stablecoin individuals could hold when it first launched.

Stablecoin rules face industry pressure

Companies dealing in cryptocurrencies have cautioned that tough rules about holding reserves could hinder the expansion of stablecoins in the UK. The Bank of England had initially suggested that stablecoin issuers maintain at least 40% of their reserves in non-interest-bearing accounts with the central bank. However, Marcos Viriato has noted that financial companies prioritize things like meeting regulations, ensuring systems work together, and speeding up transactions over strict reserve requirements.

The Bank is also building out the technology for digital finance in wholesale markets. Sixteen companies, such as HSBC and the London Stock Exchange Group, are getting ready to offer tokenized trading and settlement services through the UK’s Digital Securities Sandbox.

The Bank intends to offer settlement services close to 24 hours a day, seven days a week, over the next few years. They also plan to directly connect with networks using tokenized assets by 2027 as part of larger improvements to their systems.

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2026-05-20 16:07