BoE targets tokenization, stablecoins and retail CBDC

At London’s City Week 2026, Deputy Governor for Financial Stability Sarah Breeden outlined a Bank of England plan to base its future payments strategy on tokenization, regulated stablecoins, tokenized bank deposits and a possible retail central bank digital currency. The Bank said it will publish draft rules for systemic stablecoins next month and aims to finalize them by the end of the year.

Breeden described shared ledger technology as a way to make retail payments cheaper and faster while reducing the number of intermediaries. She said smart contracts could add conditionality, automation and customization to payment flows. “In retail payments, we want a multi-money system that promotes competition and choice between robust forms of money,” Breeden told the conference.

Bank officials warned rapid stablecoin adoption could create risks and said they may impose temporary limits on the total amount of stablecoins that can be issued to curb early risks. The draft rules due next month are intended to define which stablecoins would be treated as systemic and subject to stronger requirements.

The Bank also wants commercial banks to issue tokenized deposits and is developing next-generation retail infrastructure so those deposits can be used for payments between banks, not only within a single bank’s customer base. Breeden noted the expectation that banks will innovate in tokenized deposits and work with authorities on the required technical and legal plumbing.

On May 18 the Bank and the Financial Conduct Authority published a joint consultation that expands the government’s tokenization program and centers on the Bank-FCA Digital Securities Sandbox. Launched in 2024 and running until January 2029, the sandbox allows firms to operate live trading venues and settlement systems for tokenized securities. Breeden said 16 firms are preparing to launch on the sandbox from late 2026, naming participants that include Euroclear, HSBC and the London Stock Exchange Group.

The Bank set out that the prudential treatment of UK banks’ exposures to tokenized assets will match that for non-tokenized equivalents where legal rights and underlying risks are comparable, keeping capital and risk standards consistent across formats. The Bank will continue to support the Digital Gilt pilot for tokenized sovereign bonds and plans to publish the conclusions of the design phase for a possible retail CBDC later this year. Breeden urged authorities, government and industry to “put some ‘runs on the board’” and deepen the tokenized finance ecosystem.

Breeden also said the Bank is taking steps to support responsible adoption of artificial intelligence, including agentic payments and commerce, and described AI and distributed ledger technology as complementary developments for future payment systems.

The Bank’s announcements come as other governments pursue similar policies. Japan’s ruling party has set out a program that prioritizes AI and blockchain technologies, including tokenization, stablecoins and agentic commerce.