Bank of England ‘open minded’ on use of stablecoins in wholesale markets
A director at the Bank of England has said Britain’s central bank is “open minded” on the use of stablecoins in wholesale markets in a marked softening of its stance in the technology.
Speaking at the City Week conference, Sasha Mills, Executive director of Financial Market Infrastructure, said the Bank was “considering” what role stablecoins could play in wholesale markets.
“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 said.
“But we are also open minded to stablecoins being able to provide innovation that could also be useful for wholesale markets.”
The remarks contrast with the Bank’s more cautious approach to the use of stablecoins, with a discussion paper published in July 2024 stating that its “initial analysis…notes that there are significant financial stability risks from the use of stablecoins for wholesale transactions.”
Mills also said the BoE had softened its view on the rules for the operation of stablecoins following strong pushback from industry against the Bank’s insistence all of the backing assets would have to be invested in unremunerated central bank deposits.
“We are now minded to allow for a proportion of backing assets to be remunerated,” Mills said. “We consider that this should happen by allowing a proportion of backing assets to be invested in high quality liquid assets.”
Mills added that the BoE will be consulting on the precise details the Bank’s stablecoin requirements later this year.
‘Encouraging’ signs from the Bank of England
Mike Ringer, a financial services Partner with law firm CMS, said: “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 launched its “DLT Innovation Challenge” to help it better understand the implications of incorporating distributed ledger technology by allowing firms 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 run for approximately a month from mid-September with participants short-listed to present at an in person showcase event on 21 October 2025.