The UK's Multi-Moneyverse: the Bank of England's Integrated Strategy for Digital Finance
- James Ross
- Sep 6
- 12 min read
Updated: Sep 7
Executive Summary
Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, describes a multi-moneyverse' strategy that unites UK initiatives. The report analyses this plan, highlighting its principles and impact on the UK's financial sector. It argues the UK aims to evolve money by fostering a competitive, innovative environment where public and private sterling forms, including a potential CBDC, stablecoins, and tokenised deposits, coexist and are interchangeable.
This strategic vision relies on three pillars: modernising financial infrastructure with RTGS service RT2; adopting a pragmatic regulation approach exemplified by stablecoin frameworks and the Digital Securities Sandbox; and ensuring interoperability among all money forms to uphold the unity and trust of the sterling system.
The strategy's implications are transformative, reshaping the UK financial landscape with threats and opportunities for banks. It fosters FinTech innovation by lowering entry barriers and setting new regulations. For businesses and households, it offers cheaper, faster, more innovative payments but introduces complexities around data privacy and security. The multi-moneyverse strategy aims to position the UK as a digital finance leader by leveraging regulatory agility post-Brexit. Its success depends on overcoming technical and political challenges, as well as critical choices regarding the Digital Pound.
1: Deconstructing the 'Multi-Moneyverse' Vision
The 'multi-moneyverse' concept serves as the guiding philosophy for the UK's approach to the future of money. It is a deliberate framework designed to harness technological innovation while preserving the fundamental stability and public trust that underpins the monetary system.
1.1 Defining the Vision: Choice, Innovation, and Trust
The core of the multi-moneyverse is a vision for a system where multiple forms of money—traditional and tokenised commercial bank deposits, privately issued stablecoins, and central bank money (physical cash and the potential Digital Pound)—not only coexist but are freely and seamlessly exchangeable.
The vision is structured around three guiding principles:
Choice: Providing UK households and businesses with a diverse range of payment options.
Innovation: Leveraging new technologies, such as Distributed Ledger Technology (DLT), to drive the development of faster, cheaper, and more convenient payment systems.
Trust: Ensuring the entire system is underpinned by unwavering public confidence in the value and interchangeability of money. This commitment to safeguarding trust is the paramount objective shaping every facet of the strategy.
1.2 The Three-Pronged Role of the Central Bank
To deliver this vision, the Bank of England has articulated a clear, three-pronged strategic role for itself:
Providing Infrastructure: The Bank will continue to provide foundational infrastructure, vital given the unique role of central bank money as the ultimate risk-free settlement asset. The modernisation of the RTGS system into RT2 is the primary manifestation of this role.
Designing Regulatory Frameworks: The Bank, with authorities like the Financial Conduct Authority (FCA), will design and enforce regulatory frameworks for financial market infrastructures and private money issuers. The goal is to manage risk and maintain economic stability, allowing innovation to thrive safely.
Setting Overall Strategy: The Bank will set a clear, overarching strategy to guide public and private sector investment. This strategic direction is intended to ensure the benefits of new technology are realised in a way that aligns with public policy goals, without attempting to 'pick winners'.
1.3 The Interplay of Money Forms
The multi-moneyverse is a "mixed ecosystem" where different forms of money play distinct but complementary roles. The authorities have adopted a policy of neutrality, creating a managed, competitive landscape where public and private forms of money compete on their merits. The Digital Pound is not intended to be a monopoly but a public utility platform that sets a baseline for safety and efficiency. Similarly, stablecoins are viewed not as a threat to be suppressed, but as a source of innovation to be regulated and integrated.
Feature | Central Bank Money (Cash/Digital Pound) | Commercial Bank Money (Deposits/Tokenised Deposits) | Private Digital Money (Regulated Stablecoins) |
Issuer | Bank of England | Commercial Banks | Authorised Private Firms (Non-banks) |
Form of Liability | Direct liability of the central bank | Liability of the commercial bank | Liability of the private issuer |
Risk Profile | Credit and liquidity risk-free | Subject to the bank's credit and liquidity risk (mitigated by deposit insurance) | Subject to the issuer's operational risk and the quality of backing assets |
Primary Use Case | Anchor of value, ultimate settlement, public payment option | Credit creation, general-purpose payments | Potential for specific use cases (e.g., cross-border payments, DLT settlement) |
Underlying Technology | Physical (cash); Centralised ledger (potential for Digital Pound) | Traditional centralised bank ledgers; potential for DLT (tokenised deposits) | Primarily DLT-based |
Table 1: Comparative Overview of Money Forms in the Multi-Moneyverse. |
2: The Foundational Layer – Modernising the UK's Payments Infrastructure (RT2)
The vision of a dynamic multi-moneyverse cannot be realised on outdated foundations. The new Real-Time Gross Settlement (RTGS) service, RT2, is the strategic, physical foundation upon which the entire vision is being built.
Launched in April 2025, the RTGS system is the heart of the UK's financial system, settling an average of £500 billion to £800 billion each day. RT2 was explicitly designed around core strategic goals, with technical capabilities built to match:
RT2 Feature | Technical Description | Strategic Objective |
Enhanced Resilience | Cloud-native architecture, zero data loss recovery, failover capabilities, and advanced security. | Safeguard financial stability and reinforce trust in the UK's core settlement system. |
Broader Access | Proportional, risk-based model for non-bank Payment Service Providers. | Increase competition and innovation in payments by lowering barriers to entry. |
ISO 20022 Interoperability | Adoption of the global standard for rich, structured payment messaging. | Improve efficiency of domestic and cross-border payments, enhance compliance, and enable better fraud detection. |
API-led Functionality (BERTI) | A suite of APIs providing real-time access to payment and liquidity data. | Empower participants to automate processes, manage liquidity more effectively, and build innovative new services. |
Extended Operating Hours | Phased transition towards near 24/7 settlement, starting with earlier opening times. | Reduce friction in cross-border payments and support the needs of a global, always-on digital economy. |
DLT-Ready Settlement | In-built functionality to settle transactions for assets traded on external distributed ledgers. | Provide a secure bridge between traditional finance and the emerging world of tokenised securities and assets. |
Table 2: Key Features and Strategic Objectives of the RT2 Service. |
Crucially, RT2 was designed to be future-proof. It possesses the built-in functionality to enable settlement in central bank money for assets that are traded and settled "on-chain," providing a secure bridge between the traditional financial system and the emerging world of tokenised assets. Without the successful implementation of RT2, policy discussions around a Digital Pound, stablecoins, and tokenised deposits would remain purely theoretical.
3: The Public Option – The Case for a Digital Pound
The potential introduction of a retail CBDC, the 'Digital Pound', represents the most significant and debated component of the multi-moneyverse. It is positioned not as a replacement for private money but as a public option designed to fulfil specific strategic objectives.
3.1 Primary Motivations
The Bank of England and HM Treasury have articulated two primary motivations:
Sustaining access to UK central bank money: In an economy where cash use is declining, the Digital Pound would serve as a digital equivalent to banknotes, ensuring the public retains access to risk-free central bank money and preserving the "singleness of money."
Promoting innovation, choice, and efficiency: By providing a core public infrastructure, the authorities aim to create an open platform upon which a competitive ecosystem of private sector firms can build innovative payment services, preventing market domination by a few large firms.
3.2 The Proposed 'Platform' Model
The proposed model is a two-tiered or "platform" public-private partnership:
The Public Layer: The Bank of England would issue the Digital Pound and operate the core ledger, providing foundational trust and stability.
The Private Layer: User-facing services (e.g., digital wallets) would be provided by a diverse range of private sector firms, known as Payment Interface Providers (PIPs), who would compete on service and innovation.
3.3 Addressing the Risks
The project faces significant public and political concerns, which the authorities are actively addressing:
Privacy: A legislative guarantee would ensure neither the Bank of England nor the Government could access users' personal data.
Control: The authorities have been unequivocal that the Digital Pound itself would not be "programmable" by the state. Any programmability would be an optional feature offered by private PIPs with user consent.
Bank Disintermediation: To mitigate the risk of large-scale deposit outflows from commercial banks, an initial holding limit of £10,000 to £20,000 per individual has been proposed.
3.4 A Strategic Reassessment?
Recent reports suggest officials are reconsidering active plans for a consumer digital currency due to private-sector payment tech advances and political issues. The project is shifting from product creation to a strategic 'option' for the state. The Digital Pound's credible prospect encourages private sector innovation. Its success may be measured by its ability to spark enough innovation, possibly making launch unnecessary. The Digital Pound Lab (August 2025) provides a platform for industry testing, advancing this strategy.
4: Regulating the Private Sector – A Framework for Stablecoins
Privately issued stablecoins are seen as a potent source of innovation, but also present risks. UK authorities are developing a comprehensive regulatory framework to bring them within the financial perimeter, striking a balance between risk mitigation and fostering a competitive market.
4.1 Bringing Stablecoins into the Regulatory Perimeter
Draft legislation proposes to amend the Financial Services and Markets Act 2000 (FSMA) to create new regulated activities for "qualifying stablecoins." Issuance, dealing, and custody of such stablecoins will require firms to be authorised and supervised by the FCA, subjecting them to established standards of conduct, resilience, and consumer protection.
4.2 Core Requirements
The proposed rules focus on ensuring stability and trustworthiness:
Backing Assets: Issuers must hold 100% backing in high-quality liquid assets (HQLA), legally segregated in a statutory trust for the exclusive benefit of coin-holders.
Redemption Rights: Holders must have a direct legal right to redeem tokens for fiat currency at par, on demand (T+1).
Custody Arrangements: The custodian of the backing assets must be an independent third party.
4.3 The Viability Dilemma: A Pragmatic and Evolving Approach
Initial proposals raised industry concerns about commercial viability. In response, Sarah Breeden acknowledged this feedback and signalled a crucial evolution in regulatory thinking. The Bank of England now intends to consult on revised proposals that would permit systemic stablecoins to hold a portion of their backing assets in a carefully selected subset of HQLA, such as short-dated government securities.
This pragmatic shift is highly significant. It demonstrates a constructive dialogue with industry and is a competitive move in the global financial arena. By establishing a robust yet workable regime, the UK aims to set a "gold standard" for stablecoin regulation, attracting reputable global players and leveraging regulation as a competitive advantage.
Regulatory Area | Proposed Requirement | Stated Objective |
Issuer Authorisation | Firms must be authorised and supervised by the FCA to conduct regulated stablecoin activities. | Ensure issuers meet minimum standards of governance, operational resilience, and conduct. |
Backing Assets | 100% backing with HQLA, held in a segregated statutory trust for coin-holders. | Protect consumers by ensuring the stablecoin is fully collateralised at all times. |
Redemption Rights | Direct, at-par redemption for fiat currency on demand (T+1) with no minimums. | Guarantee convertibility and maintain the 1:1 value peg. |
Custody Arrangements | Backing assets must be held by an independent, third-party custodian. | Prevent conflicts of interest and ensure the security of reserve assets. |
Capital Requirements | Issuers will be subject to prudential capital requirements. | Ensure the firm has sufficient financial resources to absorb losses and wind down in an orderly manner. |
Disclosure & Transparency | Clear and regular disclosures to customers about the stablecoin's mechanics and backing assets. | Provide users with the necessary information to make informed decisions. |
Table 3: Summary of Proposed UK Stablecoin Regulatory Requirements. |
5: Fostering Wholesale Innovation – The Digital Securities Sandbox (DSS)
Parallel to retail payments, a transformative effort is underway in wholesale markets. The Digital Securities Sandbox (DSS) is a core component of the UK's innovation strategy, serving as a practical, real-world testing ground for integrating new technologies like DLT into capital markets infrastructure.
Operational since January 2024, the DSS is a regulated live environment allowing firms to test the use of developing technologies for issuing, trading, and settling real financial securities. It uses powers under FSMA 2023 to create a modified legal regime, temporarily waiving or altering existing rules that hinder DLT-based models. A key use case will be testing the upcoming UK Digital Gilt (DIGIT).
The DSS employs a staged "glidepath" design, allowing participants—which range from startups to incumbents like HSBC and the London Stock Exchange Group—to test, go live, and scale their operations under close regulatory supervision. This approach systematically de-risks a once-in-a-generation technological transition for UK capital markets, allowing regulators to learn by doing and co-create a fit-for-purpose permanent regulatory regime in partnership with the industry.
6: The Unifying Principle – The Strategic Imperative of Interoperability
Across the diverse landscape of the multi-moneyverse, interoperability is the critical linchpin for the entire strategy. It is the ability of users to switch, without barriers, between different forms of sterling money and the payment services that use them. It is the practical embodiment of the "singleness of money" principle.
This is fundamental to preventing the creation of "walled gardens" or closed-loop payment systems that stifle competition and lock in users. A highly interoperable system, by contrast, is a powerful pro-competitive force that lowers barriers to entry for new firms. Achieving this requires harmonising both "hard" infrastructure (e.g., common messaging standards, such as ISO 20022) and "soft" infrastructure (e.g., compatible legal and regulatory frameworks).
By controlling the standards and gateways for interoperability—for example, by defining the terms of access to the RT2 settlement system—the Bank of England can retain ultimate control over the integrity and unity of the monetary system, ensuring its own monetary sovereignty in an ecosystem with multiple, technologically advanced private issuers.
7: Strategic Implications for the UK Financial Ecosystem
The integrated multi-moneyverse strategy will have profound consequences for all participants in the UK's financial ecosystem.
7.1 For Incumbent Financial Institutions
Threats: The Digital Pound poses a danger of deposit disintermediation, potentially increasing banks' funding costs. Intensified competition in payments will come from non-bank PSPs with direct access to RT2 and from regulated stablecoin issuers.
Opportunities: Banks can leverage RT2's advanced capabilities for their own operations. They can adopt new roles as PIPs in a Digital Pound ecosystem or as custodians for digital assets. Crucially, the competitive pressure acts as a catalyst for internal innovation, such as the development of tokenised deposits, which offer the benefits of programmability within the trusted banking framework.
7.2 For FinTech and New Payment Providers
Opportunities: Lowered barriers to entry via direct access to RT2 settlement is a game-changer. The creation of new regulated markets for stablecoins and digital pound services creates legitimate, large-scale business opportunities.
Challenges: Operating in the formal regulatory perimeter means a significant increase in regulatory burden, compliance costs, and supervisory scrutiny.
7.3 For Businesses and Households
Benefits: The strategy aims to deliver efficiency and lower costs through faster, cheaper payments. A more competitive landscape promises greater choice and innovation, while a Digital Pound could enhance financial inclusion.
Complexities and Risks: Data privacy becomes a paramount concern. A failure to achieve seamless interoperability could lead to market fragmentation. The proliferation of digital wallets also creates new security risks from fraud and cybercrime.
7.4 For the UK's Global Competitiveness
The multi-moneyverse strategy is an ambitious attempt to position the post-Brexit UK as a world leader in the future of finance. The UK's flexible, pragmatic, and innovation-focused regulatory design is crafted to attract global talent and investment. Success would mean the UK could play a leading role in writing the international rules for next-generation financial services. Failure could risk the UK becoming a "rule-taker" rather than a "rule-maker," eroding the long-term competitive advantage of its financial services industry.
8: Conclusion and Forward Outlook
The Bank of England's "multi-moneyverse" vision is a deeply interconnected and highly ambitious national strategy to shape the evolution of money proactively. Its strength lies in its integration: a modernised RT2 foundation, a dynamic tension between public (Digital Pound) and private (stablecoins, tokenised deposits) innovation, and an experimental approach to wholesale markets (DSS), all unified by the principle of interoperability.
However, its success is contingent on navigating several critical dependencies:
The Fate of the Digital Pound: The ultimate decision on whether to build and launch a retail CBDC is the single most significant unresolved question.
Achieving True Interoperability: The technical and regulatory challenge of linking disparate systems is immense and the most critical potential point of failure.
Public and Political Adoption: Gaining a social license to operate, particularly around privacy concerns, will be as crucial as solving the technical challenges.
The United Kingdom has articulated a clear and sophisticated strategy. The blueprint has been drawn, and the foundational work is underway. The critical phase of implementation will now determine the UK's role in shaping the future of global finance.
Next-Step Timeline
The following timeline outlines key upcoming initiatives, anchored by the current date of September 2025:
Already Active / Completed:
2023: Legislation for a regulatory regime for stablecoins set out.
January 2024: Digital Securities Sandbox (DSS) becomes operational.
April 2025: Launch of the new RT2 (Real-Time Gross Settlement) service.
July 2025: Announcement of the new model for UK retail payments infrastructure and the creation of the Retail Payments Infrastructure Board (RPIB).
August 2025: Launch of the Digital Pound Lab for industry experimentation.
Later this year (Late 2025):
Stablecoin Regulation: Bank of England to publish revised proposals for consultation on the systemic stablecoin regulatory regime (including the HQLA backing adjustments).
Payments Strategy: The Payments Vision Delivery Committee (PVDC) to publish its strategy and a Payments Forward Plan.
Next Year (2026):
RT2 Synchronisation Lab: Launch of the lab to fully integrate central bank settlement (RT2) with transactions happening on external ledgers (including DLT).
Digital Pound Blueprint: Publication of the blueprint setting out the key design elements for a potential Digital Pound.
Digital Pound Decision: A formal decision from the Bank of England and HM Treasury on whether to proceed to a "build phase" is expected after 2025/2026.
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