Sasha Mills, Executive Director of Financial Market Infrastructure at the Bank of England, indicated a more receptive attitude towards stablecoins in wholesale markets during her speech at the City Week conference.
She mentioned that while the Bank maintains that central bank money should remain the primary settlement asset, they are “considering” the potential role of stablecoins, as reported by City AM.
“The Bank has always been clear that central bank money should be the primary settlement asset in the financial system, and we are innovating central bank money to ensure this remains the case,” Mills stated. However, she added, “But we are also open minded to stablecoins being able to provide innovation that could also be useful for wholesale markets.”
This represents a shift from the Bank’s previously cautious stance as outlined in a discussion paper from July 2024, which highlighted substantial financial stability risks associated with stablecoins in wholesale transactions.
Furthermore, Mills revealed that the Bank of England has revised its position on the regulatory framework for stablecoins after feedback from the industry regarding the requirement for backing assets to be held in non-interest-bearing central bank deposits. “We are now minded to allow for a proportion of backing assets to be remunerated,” she explained, suggesting that this could be achieved by permitting some backing assets to be invested in high-quality liquid assets.
Mills remarked that later in the year, the Bank of England (BoE) will seek input on the specific details it requires for stablecoins.
‘Encouraging’ signs from the Bank of England
Financial services partner at CMS law firm, Mike Ringer, commented: “The Bank remains naturally prejudiced towards the use of ‘the ultimate risk-free settlement asset, central bank money’ in wholesale markets, but it’s encouraging to see it starting to recognise the potential of other forms of digital settlement asset such as stablecoins and tokenised deposits.
“It is vital that the central bank and regulators strike the right balance between protecting financial market integrity and consumers on the one hand, with the need to position the UK at the forefront of technological innovation on the other. “.
“The UK is already a second mover in this regard, with jurisdictions like Hong Kong innovating at pace across digital financial markets, so the time for prevarication is over – we need more than just supportive speeches.”
Last month, the Bank of England initiated its “DLT Innovation Challenge” to aid in comprehending the implications of integrating distributed ledger technology by allowing companies to “demonstrate how to securely transact and settle central bank money on an external ledger that is not controlled by the Bank.”
The challenge will proceed for around a month beginning in mid-September, concluding with select participants presenting at a live showcase event on 21 October 2025.
