A secondary objective for the Bank of England, a lever for the Treasury

At the end of August 2026 HM Treasury announced that it would use a government amendment to the Financial Services and Markets Bill to give the Bank of England a second objective, subordinate to financial stability: innovation in the payment systems the Bank supervises, which the announcement says expressly includes those settling in stablecoins. The press reported on 26 August, the notice on gov.uk is dated 27 August, and the text of the amendment has been on the Running List of Amendments for the Report Stage in the House of Lords since 28 August. The House debated it on 7 September and agreed it on 9 September.

Read the notice and the story is one of a central bank being handed innovation as a statutory task. Read the amendment and the story is more sober. The new section 30J of the Bank of England Act 1998 reproduces almost word for word the sentence that section 30D has contained for central counterparties and central securities depositories since 2024, with one word swapped. What is new, and absent from every report, are two side provisions: under the draft, the annual report on the objective goes to the Treasury and not, as the notice puts it, to Parliament, and a section 30K obliges the Treasury to send the Bank recommendations on economic policy at least once in each Parliament, which the Bank must answer within twelve months. The innovation objective is less an empowerment of the Bank than a channel from the Treasury to it.

The sentence dates from 2023, and one word has changed

The Treasury's notice names the model itself: the Bank already has a secondary innovation objective for CCPs and CSDs under FSMA 2023, and the reform will “extend the same approach to systemic payment systems, including those using digital settlement assets”. That model is section 30D(2) of the Bank of England Act 1998, inserted by section 48 of FSMA 2023 and, according to legislation.gov.uk, in force in stages since 1 January 2024. The sentence there reads: “In exercising its FMI functions in a way that advances the Financial Stability Objective the Bank must, so far as reasonably possible, act in a way which, as a secondary objective, facilitates innovation in the provision of FMI services (including in the infrastructure used for that purpose) with a view to improving the quality, efficiency and economy of the services.”

The new section 30J(1) takes that construction over limb by limb. Under the wording of the amendment, the Bank must, “in exercising its relevant payment systems functions in a way that advances the Financial Stability Objective”, facilitate innovation as a secondary objective in three things: the operation of recognised payment systems, the services of recognised providers of digital settlement assets, and the services third parties provide to such systems, “with a view to improving the quality, functionality and economy of the systems and services”. Where 2023 spoke of efficiency, the draft now speaks of functionality. The explanatory statement repeats the triad without explaining the swap.

The attitude behind it is, admittedly, already on record; the Bank's Financial Stability Strategy of 17 April 2026 describes its role towards market infrastructure as, “subject to that, facilitating innovation in the provision of these FMI services”. The scope, however, is different. The “relevant payment systems functions” are, under section 30J(2), the principles the Bank sets under section 188 of the Banking Act 2009, the codes of practice under section 189 and its general policy for the supervision of recognised payment systems under Part 5 of that Act: the framework in which CHAPS runs and, since FSMA 2023, the framework for systemic stablecoins as well. A secondary objective for that framework reaches further than one for clearing houses.

The Lords asked for competition and growth; the government copied innovation

The announcement has a longer history in committee. On 1 July 2026, according to Hansard, the Grand Committee of the House of Lords had before it two amendments that went further than the present proposal: Amendment 102 sought to extend the secondary competitiveness and growth objective that the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have carried since 2023 to the Bank's market infrastructure functions; Amendment 104A, in the name of Lord Holmes of Richmond, sought to give the Bank secondary objectives for payment systems modelled on those of the Payment Systems Regulator, beginning with a competition objective. Neither amendment was moved at the end of the debate, the record shows.

Lord Stockwood, then Minister for Investment, spoke for the government, and his reasoning is the key to the present amendment. On the proposal to bind the Bank to competitiveness he said, according to Hansard: “The UK's success as a global centre for financial market infrastructure depends on its reputation for resilience … The Government therefore do not believe that it would be appropriate for the regulatory framework for these firms to focus on international competitiveness or growth in the same way as other firms …” On payment systems he added that the government wanted to support competition, innovation and growth “alongside security and resilience” but considered the Bill sufficient: the FCA would take on the objectives of the Payment Systems Regulator, which the Bill abolishes, together with its own competitiveness and growth objective.

Eight weeks later the government amendment does read like a concession to the committee. What it actually does is put into statute the division of labour Lord Stockwood described in July: competition and growth stay with the FCA, and the Bank receives innovation in the narrow form it already has for clearing houses and central securities depositories. Anyone who reads the reform as an adoption of the FCA model is confusing two provisions: section 30J copies section 30D, not section 25 of FSMA 2023. On 1 July, Baroness Kramer had already drawn the line that the amendment now observes: “I am cautious of Amendments 102 and 104A, because they could easily be read as an instruction to waver on the Bank of England's primary objective of financial stability.” The government text opens with the stability objective and places innovation behind it.

The report goes to the Treasury, and the Treasury sends recommendations back

On accountability the notice of 27 August has one sentence: “The Bank will report annually to Parliament on how it was advancing the innovation objective.” The amendment says something else. A new section 4A requires the Bank, “at least once a year”, to make a report “to the Treasury” on how it has complied with sections 30D(2) and 30J(1); the report must be published and, under the draft, may not be combined with any other report. Parliament can read it, but the addressee is the Treasury, and it is the addressee who asks for answers.

The sentence no press notice carries is in section 30K. The Treasury “may at any time by notice in writing to the Bank make recommendations about aspects of the economic policy of His Majesty's Government to which the Bank should have regard when considering how to advance the Financial Stability Objective and the secondary objective under section 30J(1)”, and it “must make recommendations under subsection (1) at least once in each Parliament”. The draft requires the Bank to reply in writing within twelve months, setting out what it has done or why it has not acted, and then to update the Treasury annually for as long as the Treasury requires. The recommendation is published and laid before Parliament. The innovation objective thereby acquires a sender.

Anyone familiar with remit letters to UK regulators will recognise the instrument: replying to the Lords' report on the FCA and PRA growth objective in December 2025, Lucy Rigby pointed, according to the Lords Library, to letters of exactly that kind. Section 30K writes the mechanism into statute for the Bank and attaches a deadline. A recommendation, admittedly, binds the Bank only to a reasoned reply; it may decline. Yet a central bank that must explain in writing, once in each Parliament, why it has not followed an economic-policy recommendation on payments negotiates differently from one that need not. The direction of UK payments supervision will be legible in a published exchange of letters before it appears in codes of practice.

Stability comes first because the value sits where there is almost no volume

The ranking of the two objectives is explained by the Bank's own figures. According to UK Finance, the UK payments market handled 49.7 billion payments in 2025, 64 per cent of them by card. Almost none of that runs through the system the Bank operates itself. CHAPS, its high-value payment system, carries, in the Bank's statistics, “0.4% of UK total payment volumes but 91% of total sterling payment values”, in each case excluding flows internal to payment service providers. In 2025, according to the same statistics, that meant 53.3 million payments worth £93.9 trillion; in the second quarter of 2026 the daily average was £411.6 billion. The Bank sums it up in a sentence: “CHAPS settles the annual UK GDP every nine working days.”

It is against that background that the Bank's stablecoin plans should be read. Its policy statement of 22 June 2026 on sterling-denominated systemic stablecoins says: “We will allow each systemic stablecoin to be subject to an initial maximum issuance of £40 billion.” According to the statement, the cap applies per product, replaces the holding limits consulted on in 2025 and is meant to fall away in time. The Bank calibrates it against its own system: the amount is “around 10% of average daily values processed by CHAPS”. Against the daily average of the second quarter of 2026 it comes to 9.7 per cent, against the 2025 daily average to 10.8 per cent; both figures are our own arithmetic from the published numbers, not a statement by the Bank. The entire permitted circulation of a systemic stablecoin is thus a tenth of what CHAPS moves in a day.

The figures say nothing about the future of stablecoins; they explain the order of the objectives. Sarah Breeden does, admittedly, argue in the Lords report of 3 June 2026 for a future in which the Bank wants to “enable sterling stablecoins to be used as money for real-world payments”. Yet the same report dates the UK crypto regime, stablecoins included, to 25 October 2027, and the policy statement requires systemic issuers, in the end state, to back 70 per cent in short-dated UK government debt and 30 per cent in unremunerated deposits at the Bank, with redemption within 24 hours; the consultation on that closes on 22 September 2026. The Treasury has fixed the order itself: the secondary objective, as the notice puts it, “will not require the Bank to support innovation where doing so would undermine financial stability”. The chart above is why that ranking will hold.

The FCA and PRA precedent shows what a secondary objective sets off in practice

Whether a secondary objective changes behaviour can be tested against the precedent that UK regulation has had since 2023. Section 25 of FSMA 2023 gives the FCA and the PRA a secondary objective directed, in the words of the statute, at “the international competitiveness of the economy of the United Kingdom (including in particular the financial services sector), and … its growth in the medium to long term”, in force since 29 August 2023. Just under two years on, the House of Lords Financial Services Regulation Committee took stock in its report “Growing pains” of 13 June 2025: the objective had proved “a valuable stimulus for the regulators to increase their focus on the impact of their activities on growth”, the environment was at the same time “characterised by a culture of risk aversion”, and both regulators had expanded their activities beyond their core responsibilities to a “significant degree of ‘mission creep'”.

The regulators pushed back, and the reply is more instructive for the new objective than the report. Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive of the PRA, wrote to the committee chair Lord Forsyth of Drumlean on 13 August 2025 that the report cited “around a third of our publicly announced SCGO-related initiatives” and that “in certain areas” he did not share its characterisation of the UK regime. The exchange between committee and government ran, according to the Lords Library, into December 2025. A secondary objective, then, produces measurable activity, a dispute over how to value it, and an exchange of letters between Parliament, ministry and regulator. Section 30K institutionalises exactly that exchange.

For section 30D itself, the new objective's closest relative, no such reckoning exists. This research found no report by the Bank in the public record on what the innovation objective has achieved at clearing houses and central securities depositories since 2024; section 4A would require one for the first time. That is a non-observation, not a finding on effect, but it does describe the sequence: the objective is being extended before anyone has measured what it delivered where it was first applied. Nor did any academic criticism of the new objective surface; the argument in the Lords was about whether it goes far enough.

In the EU innovation sits in secondary legislation, in London in the central bank's mandate

The second regime against which the London route can be measured is that of the euro area, and the comparison turns out differently from what the headline suggests. Article 127(1) of the Treaty on the Functioning of the European Union commits the European System of Central Banks to a primary objective, “to maintain price stability”, and, “without prejudice to the objective of price stability”, to supporting the Union's general economic policies. Article 127(2) lists four basic tasks, the fourth being “to promote the smooth operation of payment systems”. Innovation, competition and growth appear nowhere in the primary law. The European Central Bank has no statutory innovation objective, and it will not get one without a change to the Treaties.

That does not mean the Union does less. It takes a different route: through secondary legislation under the ordinary legislative procedure and through Eurosystem projects. The revised Payment Services Directive PSD3 and the Payment Services Regulation PSR have been politically agreed since 27 November 2025; the stablecoin titles of the Markets in Crypto-Assets Regulation (MiCA) have applied since 30 June 2024, as an earlier article traced; the digital euro regulation has been in trilogue since 13 July 2026, aiming at agreement by the end of 2026 and introduction in 2029 at the earliest. Tokenised settlement is being tested by the ECB through Pontes and Appia, in project form and without any Treaty mandate. In the UK, innovation sits in the central bank's mandate, with a reporting line to the finance ministry and a channel for recommendations coming back.

For a head of payments or treasury at a bank in Germany, Austria or Switzerland, two things follow. First, nothing changes in their legal position; anyone who derives an argument for an ECB innovation objective from London is confusing levels, because in the Union the steering sits with the Council and Parliament, in London with the Treasury. Second, the timing comparison that the industry likes to make against Brussels runs the other way: the European stablecoin regime has applied since June 2024, while the UK regime is, according to the Lords report, expected to take effect on 25 October 2027. London gives its Bank an objective before it gives issuers a regime; Brussels has the regime and no central bank with an innovation mandate. Which sequence gets usable products to market faster is an open question.

Recommendations

Glossary