A director at the Bank of England has indicated a shift in the central bank’s stance on the use of stablecoins in wholesale markets. Speaking at the City Week conference, Sasha Mills, Executive Director of Financial Market Infrastructure, stated that the Bank is “open minded” about the potential role stablecoins could play in these markets.
“The Bank has always maintained that central bank money should remain the primary settlement asset in the financial system, and we are innovating central bank money to ensure this remains the case,” Mills said. “However, we are also open minded to stablecoins providing innovation that could be beneficial for wholesale markets.”
This marks a departure from the Bank’s previously cautious approach. A discussion paper published in July 2024 highlighted significant financial stability risks associated with the use of stablecoins for wholesale transactions.
Mills further noted that the Bank of England had reconsidered its stance on the rules governing stablecoins following strong industry pushback. Initially, the Bank insisted that all backing assets be invested in unremunerated central bank deposits. “We are now minded to allow for a proportion of backing assets to be remunerated,” Mills said. “This would involve permitting a portion of these assets to be invested in high-quality liquid assets.”
The Bank of England plans to consult on the specific details of its stablecoin requirements later this year.
‘Encouraging’ Signs from the Bank of England
Mike Ringer, a financial services Partner at law firm CMS, commented: “The Bank remains naturally inclined towards using ‘the ultimate risk-free settlement asset, central bank money’ in wholesale markets, but it’s encouraging to see it beginning to recognise the potential of other digital settlement assets like stablecoins and tokenised deposits.”
Ringer emphasised the importance of balancing financial market integrity and consumer protection with the need to position the UK at the forefront of technological innovation. “The UK is already a second mover, with jurisdictions like Hong Kong innovating rapidly across digital financial markets. 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 explore the implications of incorporating distributed ledger technology. The initiative allows firms to “demonstrate how to securely transact and settle central bank money on an external ledger not controlled by the Bank.” The challenge is set to run for approximately a month from mid-September, with shortlisted participants presenting at an in-person showcase event on 21 October 2025.
