[co-author: Felix Scrivens]
On 2 July 2025, the Bank of England published a speech delivered by Sasha Mills (Executive Director, Financial Market Infrastructure) at City Week 2025. The speech signals the Bank's support for the digitalisation of wholesale financial markets (including the adoption of distributed ledger technology (DLT)), summarises the Bank's ongoing initiatives in this space and provides an indication of upcoming publications.
Against the backdrop of HM Treasury’s and the Financial Conduct Authority’s recent publications on the developing regime for cryptoassets in the UK, Sasha Mills (the Bank of England’s Executive Director, Financial Market Infrastructure) gave a speech at City Week 2025 which sheds further light on the Bank of England’s (the “Bank”) approach to the digitalisation of the UK’s financial system.
(For further information on recent UK cryptoasset regulatory developments, please also see our articles on the draft statutory instrument on regulating cryptoasset activities, and the FCA consultations on new cryptoasset activities, stablecoin issuance and cryptoasset custody, and a prudential regime for cryptoasset firms).
Some key points of note are as follows:
- The Digital Securities Sandbox (the “DSS”) and the Digital Gilt (“DIGIT”)
Significant momentum has been building around the Digital Securities Sandbox, particularly following the UK government’s announcement of pursuing a pilot issuance of DIGIT via the DSS (see also our previous article on the DSS). Beyond enhancing efficiency of post-trade processes, entrants to the DSS are demonstrating further use cases for DLT such as improved collateral mobility, and the better servicing of areas of the financial markets such as gold, fund management and private markets. The Bank also welcomes the range of distributed ledger models put forward (e.g. public, private, permissioned, or permissionless) which is expected to help yield essential regulatory insights for long-term policymaking.
Importantly, the Bank is considering the role that stablecoins could play within the DSS, with further details to be released later this year.
- Systemic stablecoins
In response to industry feedback following the Bank’s Discussion Paper on systemic retail stablecoins used for payments published in November 2023(see also our previous article), the speech indicates that the Bank may allow a portion of backing assets to be invested in high-quality liquid assets (rather than mandating 100% of backing assets to be invested unremunerated central bank deposits). This builds on the message in a speech by Sarah Breeden earlier this year.
In terms of holding limits for systemic stablecoins which are directed at managing financial stability risks arising from sudden outflows of bank deposits, such limits are currently proposed to be set at approximately £10,000–£20,000 for individuals and £10 million for businesses. However, these measures are not finalised, and the Bank intends to consult on the details of the regime for systemic stablecoins later this year.
- Tokenised deposits
Tokenised deposits, which have the benefit of combining the regulatory protections and credit creation benefits of traditional deposits with instantaneous on-chain settlement, are regarded as “promising innovation”. The Bank is taking steps to explore the integration of tokenised deposits across initiatives like the DSS and the National Payments Vision.
- Wholesale central bank settlement
In addition to the use of stablecoins and tokenised deposits for settlement, the Bank is also exploring the role of DLT in wholesale central bank settlement. The recent launch of the DLT Innovation Challenge in partnership with the BIS Innovation Hub is aimed at engaging the private sector in exploring the integration of DLT into wholesale payment systems, and assessing whether wholesale central bank money can be transacted and settled on an external programmable ledger.
- Tokenisation and financial market infrastructures (FMIs)
Recognising the importance of innovation within the FMI landscape and the emergence of new players, particularly in connection with the DSS, the Bank will soon publish its approach to onboarding new FMIs entering the Bank’s regulatory remit.
That said, the Bank stresses that it sees a ‘mixed ecosystem’—including both traditional and novel structures—as being inevitable in the foreseeable future. The ability of old and new systems to interoperate (i.e. to allow synchronised transfers between different systems with minimal or no settlement risk) will be key. Possible solutions are beginning to emerge, including solutions that leverage public blockchain networks.
- Enhancements to the Real-Time Gross Settlement Service (RTGS)
The Bank is continuing its efforts to modernise its core payment infrastructure. Following the milestone upgrade of the RTGS service, key ambitions for the new ‘RT2’ system include expanding access to omnibus accounts to more firms (including non-bank payment service providers) and extending RTGS settlement hours.
As part of the Future Roadmap for the RTGS, Mills also highlighted the introduction of a synchronisation interface that would enable the conditional settlement of funds in RTGS accounts against digital assets on external ledgers, including those based on DLT.
[View source.]
