HM Treasury plans to give the Bank of England a new secondary objective to support innovation in payment systems and digital money
HM Treasury announced on 27 August 2026 that the government intends to legislate a new secondary objective for the Bank of England, requiring it to support innovation in payment systems and emerging forms of digital money, including those using digital settlement assets such as stablecoins and technologies built on tokenisation and distributed ledger technology (DLT, the infrastructure that underpins blockchain-style systems). The innovation objective will sit below the Bank's existing primary objective of protecting and enhancing UK financial stability, meaning the Bank will not be required to support innovation where doing so would compromise stability. The Bank will report annually to Parliament on how it is advancing the new objective, creating a public accountability mechanism. The government intends to implement the change through amendments to the Financial Services and Markets Bill, which is next scheduled for debate in the House of Lords on 7 and 9 September 2026. The reform extends an approach already in place for the Bank's regulation of central counterparties (CCPs, clearing houses that sit between buyers and sellers to reduce counterparty risk) and central securities depositories (CSDs), where a secondary innovation objective was introduced through the Financial Services and Markets Act 2023. City Minister Lucy Rigby KC MP framed the move as part of a broader programme to keep the UK a global leader in financial services, while Bank of England Deputy Governor for Financial Stability Sarah Breeden welcomed it as reinforcing existing work on payments modernisation. The announcement sits within a wider government programme to modernise the UK payments landscape and support new business models in digital finance.
Why this matters
This reform directly shapes the regulatory environment for one of the fastest-moving corners of UK financial markets: digital payments, stablecoins, and tokenised assets. By embedding an innovation mandate at the Bank of England level, the government is signalling that regulatory caution alone will not define how systemic payment infrastructure is supervised, which matters for firms building or investing in digital finance products in London. The choice of the Financial Services and Markets Bill as the legislative vehicle, with Lords debates imminent, means the legal framework could be in place within months, accelerating the timetable for compliance obligations across the payments sector. For law firms advising fintechs, banks, and e-money institutions, the reform will generate a wave of regulatory analysis work as clients seek to understand how the new objective interacts with existing supervision.
On the Ground
The primary practice areas activated are financial regulation, fintech and payments law, and legislative advisory work for clients seeking to engage with the Lords debates. Banking and finance teams advising stablecoin issuers, payment system operators, and digital asset platforms will need to assess how the Bank's new mandate alters their supervisory risk profile and what disclosures or engagement the annual reporting cycle will prompt. No specific law firm advisers are named in the sources. A trainee on this type of matter would draft regulatory notification memos summarising the proposed statutory change, prepare compliance gap analysis comparing a client's current payments infrastructure against the Bank's emerging innovation framework, and coordinate responses to any consultation the Bank launches in advance of annual reporting.
Interview prep
Question you might get
“How does a secondary innovation objective at the Bank of England change the regulatory calculus for a fintech seeking to operate a systemic payment system in the UK?”
Sign up free to see the full answer
A model answer you can lift into an interview — how to frame this story for a partner.
Sign up freeSources
My notes
saved