The Bank of England is increasing its focus on digital money, with Deputy Governor Sarah Breeden highlighting tokenization as a way to potentially cut costs, speed up payments and increase competition.
Speaking at City Week in London on Tuesday, Breeden said tokenization – the representation of assets and money on a digital ledger – could improve the efficiency and functioning of payments and financial markets, as long as trust and interoperability are maintained.
Breeden stressed that central bank money remains the foundation, or “anchor,” of the monetary system, even as private sector innovations such as tokenized deposits and regulated stablecoins gain momentum.
He said the central bank is working with industry, governments and regulators to create a framework that supports innovation without compromising financial stability.
“In addition to traditional bank deposits, people should be able to pay with tokenized bank deposits, regulated stablecoins, and possibly retail central bank digital currencies (CBDCs),” he said, according to a transcript of the talk. “Increased competition from a wider range of technologies and business models should reduce costs and improve functionality for users.”
The BoE’s CBDC Academic Advisory Group said in January: “While retail CBDCs are not strictly required to maintain uniformity, they could play a valuable supporting role, particularly as the use of cash for transactions declines.”
Bank of England moves to modernize payments infrastructure
The UK is taking additional steps to prepare its financial system for tokenized assets. The central bank proposed on Monday to extend the operating hours of its core payments infrastructure to nearly 24/7 availability.
The central bank said in its proposal that the extended business hours will help support cross-border payments and securities settlements as tokenization and other digital asset technologies continue to evolve.
Excerpt from the BoE’s proposal to extend settlement times. sauce: bank of england
The proposal follows Breeden’s comments earlier this month that he was reconsidering its approach to sterling stablecoins, including whether to ease limits on how much consumers can hold. The review aims to reduce friction for early adopters as policymakers seek to strengthen the UK’s position as a competitive hub for digital assets.
The Bank of England has softened its stance on stablecoins in recent months as officials work more closely with industry groups and revisit previous proposals that would have imposed stricter reserve and backing requirements.
