The Bank of England’s approach to innovation in artificial intelligence, distributed ledger technology, and quantum computing

Foreword

We are living through a period of profound technological transformation. Advancements in artificial intelligence (AI) have created new possibilities ranging from self-driving cars to improvements in medical diagnostics and treatment to more personalised financial services. The development of distributed ledger technology (DLT) has enabled innovations like the tokenisation of assets and of money, offering the potential for greater efficiencies and new functionalities. In the not-too-distant future, quantum computing could solve computational problems at scale that are beyond the capabilities of the best computers today.

The UK’s financial services sector has a long history of embracing technological change and these innovations are no exception. Many firms are already using AI, piloting DLT applications, and exploring opportunities to use quantum computing. Beyond acting as an early adopter of these technologies, the financial services sector has an important role to play in enabling other sectors to adopt them too. If adopted widely and responsibly, these technologies could boost the UK’s productivity and overall economic growth.

These developments could have profound impacts on the financial system and the UK economy. This means that, at the Bank of England, we need to understand the scale of these changes, what they mean for the work we do – monetary stability, financial stability, safe and sound firms – and how we can support the sector to adopt these technologies responsibly. Embracing responsible innovation is core to delivering on our objectives as a central bank.

Our job is not to slow this innovation, but to shape it. While being vigilant to risks, we encourage responsible innovation – to make the financial system more resilient and efficient, support sustainable economic growth, and enable us to fulfil our responsibilities more effectively. Innovation thrives where it has a strong foundation, and we have a role in delivering that through a resilient financial system with robust standards.

In this publication, we outline our approach to delivering the environment necessary to ensure that responsible innovation flourishes, setting out the work we have done, and will do, across AI, DLT, and quantum computing. While we have focused on these as the three technologies with the greatest potential today to shape our economy and financial services, we recognise that technological trends are difficult to forecast. Currently expected benefits may not materialise, and new technologies impacting our work will emerge in future. Our approach is flexible to that. And as part of this work, we will continue to collaborate with industry and domestic and international partners to develop a shared understanding of the opportunities and the potential risks.

At the Bank, we want to harness the benefits of technological change in finance, while continuing to be vigilant to risks so that we underpin not undermine growth. This publication aims to give a clearer view of how we have, and how we will, seek to achieve that.

Sarah Breeden
Deputy Governor Financial Stability

Executive summary

AI, DLT, and quantum computing could be the most transformative technologies of our time, with the potential to reshape the UK economy and boost productivity. In turn, productivity growth can raise real wages, living standards, and overall economic growth. The financial services sector has a critical role to play, both as an adopter of these technologies and as a facilitator enabling firms across other sectors to do so.

The scale of change driven by technological innovation will impact all the work the Bank of England does – from setting interest rates, to maintaining financial stability, to operating the UK’s core payments infrastructure, among others. We cannot know for certain which technological innovations will flourish and when but, as the UK’s central bank, we need to understand how these technological changes affect our remit, while also enabling the financial services sector to adopt these technologies safely. By ‘responsible innovation’ we do not mean ‘riskless’ innovation. Rather, we mean to emphasise that we cannot unlock the true benefits of innovation without understanding and managing the potential risks that innovation can pose.

Done right, technological innovation can deliver sustainable economic growth, make the financial system more effective and resilient, and improve how we discharge our core functions as a central bank. This innovation best endures where it has a strong foundation, which we deliver through a resilient financial system with robust standards. The private sector is best placed to drive innovation, but the Bank has a role in shaping it. This publication sets out our approach to delivering the environment necessary to ensure that our statutory objectives are met as well as support the responsible adoption of innovative new technologies. It outlines the broad toolkit at our disposal (Figure 1), including the levers we can pull and the actions we can take, to create this environment.

Figure 1: Our approach to delivering the environment necessary for responsible innovation

Footnotes

• Source: Bank of England (2025).

Our approach supports the UK Government’s vision for the UK to be the world’s most technologically advanced global financial centre.^{footnote [1]} Given the rapid pace of technological innovation, we will endeavour to share our thinking, provide thought leadership on responsible innovation, and collaborate with stakeholders across industry, other regulators, and the Government to deliver the work outlined in this publication. Ultimately, our aim is to ensure that the people and firms of the UK benefit from technological innovation, ensuring it sustainably supports economic growth, while also continuing our work on mitigating potential risks arising from these changes.

1: Technological innovation and the economy

Disruptive technological innovations have the potential to reshape the UK economy, boosting productivity, real wages, and economic growth. Throughout history, waves of productivity growth have been preceded by significant technological innovations, such as the invention of electricity, the internal combustion engine, and the information and communication technology revolution, coupled with widespread adoption and diffusion across the economy.^{footnote [2]} Productivity growth, in turn, can raise real wages and living standards, and translate into greater economic growth.^{footnote [3]}

We are currently seeing the emergence of a new wave of technological innovation, comprising the growth of AI, DLT, and quantum computing (Figure 2). Some estimates suggest that AI could almost double the UK’s annual GDP growth rate from an average of 1.6% between 2013 and 2023, to around 3% by 2035,^{footnote [4]} while quantum computing could give the UK an economy-wide productivity boost of up to 7% by 2045 (or more if the technology becomes commercially viable earlier).^{footnote [5]} Similarly, some argue that DLT could unlock transformative cost-saving and operational efficiency benefits – approximately $20 billion annually in global clearing and settlements costs – when operating at scale.^{footnote [6]} While there is inevitable uncertainty about the impact and adoption path of these technologies, there is the potential for these technologies to boost GDP and labour productivity growth (important in the context of weak UK economic growth since the global financial crisis (GFC) – Box A) while also mitigating some of the impact of future headwinds on the economy, such as a shrinking, aging labour force.^{footnote [7]} At the same time, sudden technological-driven transitions could have challenging impacts on parts of the economy by, for example, damaging competition or contributing to excessive automation that fails to improve worker productivity, which could also lead to inefficiently low wages and fuel inequality.^{footnote [8]}

Figure 2: Waves of innovation in the financial services sector

Footnotes

• Sources: United Nations (2023) and Bank of England (2025).

It is crucial that the financial services sector responsibly adopts technology to improve the services to – and financing for – the real economy. Embracing technological innovation allows firms to operate more efficiently by automating routine tasks, which can reduce their costs, raise profitability, and free up resources to finance real economy activity.^{footnote [9]} New technologies can transform traditional approaches by reshaping market infrastructures, improving efficiency and lowering cost, or by providing new products and services that may be better tailored to consumers’ and firms’ needs, improving capital allocation, risk distribution, and the flow of payments.

The innovative application of new technologies is also central to the UK maintaining its leadership as a global financial centre. When coupled with the UK’s strengths as a global technological and financial powerhouse, particularly in AI and fintech,^{footnote [10]} the UK financial services sector has an important role to play in driving economic growth and innovation. It contributes 9% of the UK’s economic output and around 1.2 million jobs as well as provides vital services to households and businesses that allow them to make transactions, manage and take risks, and invest – including in new technologies.^{footnote [11]}

2: The interaction of innovative new technologies and the Bank’s objectives

We promote the good of the people of the UK through meeting our statutory objectives (Figure 3). We act to support technological innovation in the financial services sector where it is most relevant to our objectives, working to keep inflation low and stable and making sure the UK has a stable financial system.^{footnote [16]} First and foremost, we contribute to sustainable growth through providing a stable economic environment and a resilient financial system (Box B). We can strengthen the resilience and stability of both the economy and the UK’s financial sector – and boost their competitiveness and capacity for innovation – by fostering an environment in which firms can responsibly adopt new technologies, such as AI, DLT, and quantum computing, thereby enabling the whole of the UK to benefit.

Figure 3: The Bank of England’s primary and secondary objectives

Footnotes

• Source: Bank of England (2025).

Box B: Enabling sustainable economic growth through maintaining financial stability

The financial sector makes an important contribution to sustainable economic growth by providing vital services to households and businesses. These services allow households and businesses to make transactions and manage and take risks, supporting investment, innovation, and technological progress.^{footnote [17]} In November 2024, the Chancellor asked the Financial Policy Committee (FPC) to undertake work on how the financial sector can better contribute to sustainable economic growth, which the FPC provided an update on in its July 2025 FSR, ahead of publishing its conclusions alongside the December 2025 FSR. We also responded to a similar request in our role as central securities depositories (CSD) and central counterparties (CCP) regulator in July 2025.^{footnote [18]}

Figure A: Framework showing how the Bank’s financial stability functions can contribute to sustainable economic growth

Footnotes

• Source: Bank of England (2025).

Maintaining financial stability is the basis for sustainable growth. Periods of financial instability – such as the GFC – negatively impact the provision of vital services, weighing on output and productivity growth, with material scarring impacts on the economy. Financial stability in turn supports consumer and business confidence, facilitates investment that drives innovation and long-term productivity growth, makes the UK an attractive place to do business for international investors, and supports UK firms’ ability to compete abroad, as outlined in Figure A.^{footnote [19]}

Three regulatory ‘foundations’ represent the ways our regulation underpins the UK’s growth and competitiveness. These are: (i) maintaining public trust in regulated firms; (ii) adopting effective regulatory processes and engagement; and (iii) adopting a responsive and responsibly open approach to risks and opportunities.^{footnote [20]} In June 2025, the Prudential Regulation Authority (PRA) published Competitiveness and growth: the PRA’s second report, documenting its progress on its secondary objectives (Figure 3). Technological innovation plays into all three of these and supporting it is consistent with advancing both our primary and secondary objectives.

The Bank aims to create a regulatory environment where innovation can flourish responsibly and where households, businesses, and markets can reap the benefits. In doing so, there is a careful balance to strike between writing rules to provide firms with the certainty they need to invest with confidence, while providing enough flexibility to create space for innovation to flourish. We are continuing to think carefully about this balance, and our stakeholders have an important role to play in helping us get it right.

Technological innovation can strengthen financial stability and the safety and soundness of firms when adopted responsibly. Greater automation can reduce the risks associated with manual processing, and more powerful computation techniques can improve risk management. It can also improve competition and make the financial system more resilient. However, if implemented imprudently, it may introduce risks to the Bank’s objectives.^{footnote [21]} Although we adopt a technology-agnostic approach to regulation, as outlined in Box C, we have an important role to play in ensuring the financial services sector embraces innovation responsibly.^{footnote [22]}

Technological innovation can also affect the macroeconomy, impacting monetary stability and monetary policy. As noted in Section 1, innovation can boost productivity, raising the economy’s potential output over the time horizon relevant for monetary policy. All else equal, this can lead to lower inflationary pressure. Innovation could also affect labour market slack and wage dynamics through its effect on labour demand, and innovations impacting savings and credit could influence household behaviour. These effects are relevant for monetary policy decisions and may also affect monetary policy transmission. Innovations related to dynamic pricing and agentic AI^{footnote [23]} have the potential to impact inflation dynamics and measurement.

As set out in Section 1, technological innovation is also crucial for economic growth and the competitiveness of the UK financial sector, and hence central to achieving our secondary objectives.

Technological advancement is a constant, and many innovations have only an incremental impact on our objectives. We focus our work on the most transformative technologies – those with the greatest potential benefits and risks, with potential for widespread adoption – which could radically transform the shape, functioning, and outcomes of the financial system, and where the impediments to their responsible adoption may be greatest. The Bank therefore has a role in assessing potential outcomes, monitoring the adoption path, and, where necessary, acting to shape desirable outcomes.

3: Our approach to championing responsible innovation

We want to deliver the environment necessary to ensure responsible innovation prospers. The Bank has an important role to play in creating this environment, ensuring that firms feel comfortable adopting new technologies – if they wish to do so. This will enable firms and the people of the UK to reap the benefits of technological change, while also stimulating economy-wide growth, in line with the Monetary Policy Committee and FPC’s role in supporting the UK Government’s economic policy. Our approach aims to ensure the Bank plays its role in creating the right environment for firms to invest and innovate, by removing undue barriers to innovation, and incentivising exploration and responsible technology adoption across the sector.^{footnote [25]}

Our approach is designed to champion the safe transition to a fit for the future financial system, making best use of the technologies of tomorrow, acting in support of the wider economy. We have three levers to achieve that aim: (i) using our hard infrastructure; (ii) using our soft infrastructure; and (iii) using our convening and co-ordinating role. ‘Hard’ infrastructure generally refers to physical or tangible infrastructure that facilitate the workings of the modern economy, while ‘soft’ infrastructure generally refers to rules, regulations, and standards.

• Using our hard infrastructure: The financial system operates on a variety of hard infrastructures, including digital public infrastructures (DPIs).^{footnote [26]} The Bank’s role extends to interaction with and operation of some of the most critical ones, which we can leverage to promote and sponsor innovation. The most notable example here is the Bank’s operation of the Real-Time Gross Settlement (RTGS) service which sits at the heart of UK payments. In April 2025, our renewed RTGS service (RT2), went live and has been delivering higher resilience, broader access, wider interoperability, and improved user functionality. We are now considering further enhancements to the service to ensure RT2 continues to enable innovation in retail and wholesale payments, which in turn enables innovation in wider financial markets.^{footnote [27]} For example, we are working to deliver a synchronisation interface that would allow RTGS to connect to external ledgers, including those based on DLTs, and settle in central bank money. We also contribute to initiatives with others, such as the pilot Digital Gilt Instrument (DIGIT) issuance, launched by His Majesty’s Treasury (HMT) exploring the use of DLT across the lifecycle of the UK sovereign debt issuance process.^{footnote [28]} DIGIT will be issued on a platform within the Digital Securities Sandbox (DSS),^{footnote [29]} which is jointly operated by the Bank and Financial Conduct Authority (FCA).
• Using our soft infrastructure: We are also responsible for pieces of soft infrastructure underpinning the UK financial system, such as rules, regulations, and standards. We can provide policies or guidance that shape firms’ behaviour, for example technology-specific guidance where the benefits outweigh the costs of doing so, and standards as part of our regulatory framework, which could steer firms towards responsible innovation (as outlined in Box C). For example, we need to ensure that regulations impacting the use of AI are not acting as an undue barrier to its use, impeding the benefits from its responsible adoption. Separately, new developments in digital money and assets could lead to further market fragmentation, which could amplify risks such as liquidity fragmentation.^{footnote [30]} By taking action to improve interoperability such as through harmonised standards, we can ensure the financial system reaps the benefits of digital money and assets without introducing unwarranted risks.^{footnote [31]}
• Convening and co-ordinating: We have a long history of using our convening role to understand better the benefits, risks, and challenges of technological innovation, such as through our AI Consortium^{footnote [32]} and the Cross Market Operational Resilience Group (CMORG).^{footnote [33]}

We use these three levers in combination to achieve positive outcomes. The varying functions and responsibilities of the Bank, and the hard and soft infrastructure we provide, mean that we can promote responsible innovation in several different ways. We may take concerted action to facilitate better outcomes – to act to accelerate innovation where market failures may be impeding optimal outcomes or, conversely, to shape expectations around responsible technological innovation. This is not always the right course. We need to balance taking action with the risk of crowding out private enterprise, unhelpfully dictating market structures, or picking winners. We adopt a range of interventions at differing levels of intensity, alongside our efforts continuously to learn about new technological developments and their impact on the financial sector. Collectively, these approaches support firms as they experiment with and adopt these technologies.

In practice, we use these levers through four actions:

• Engaging with innovators, including through experimentation – ensuring we stay at the forefront of new innovations, understanding emerging themes and directions, and helping to ensure our interventions are timely and proportionate.
• Adapting the execution of our core functions – be that through our hard or soft infrastructure, or how we think about risks to the financial system, to take account of innovative new technologies so that we can discharge these functions in a way that both manages emerging risks and acts as a platform for innovation.
• Identifying, reviewing, and removing undue barriers to innovation – understanding where regulatory or legal barriers to adopting new technologies may be creating unintended outcomes and working to review, refine, or remove them so the UK financial system can stay at the leading edge.
• Collaborating with domestic and international authorities – proactively engaging with other authorities, in the UK and internationally, means we can make the most of our collective knowledge and experience, and work towards an optimal enabling environment for the adoption of new technologies through consistent and coherent policies.^{footnote [34]}

4: Applying our approach to AI, DLT, and quantum computing

AI, DLT, and quantum computing are the three cross-cutting technologies that we are prioritising for further action, consistent with our focus on disruptive technologies with the most potential for transformative outcomes.

Artificial intelligence

AI^{footnote [35]} may be the most transformative technology of our time, with the potential to usher in significant efficiency gains, boost productivity, and transform the financial services sector, as well as the broader economy. Firms’ adoption of AI may scale rapidly – particularly in more material use cases, and with more autonomous and complex models – over the next few years. However, greater AI adoption could bring significant risks, such as increased possibility of cyberattacks, operational risks due to relying on third (and fourth) party providers outside the financial sector, increased possibility of correlated outcomes in financial markets, and model and data-related risks.^{footnote [36]} These risks could impact the safety and soundness of UK firms, alongside the financial and monetary stability of the UK.

AI adoption and deployment is increasing rapidly in the UK’s financial services sector. According to the joint survey by the Bank of England and the FCA, 75% of respondent firms are already using AI, with a further 10% planning to use AI over the next three years (Chart 1). Financial firms in the UK have demonstrated considerable willingness to experiment with newer and more complex models, with foundation models accounting for 17% of all use cases already.^{footnote [37]}

Chart 1: AI adoption in UK financial services

Percentage of firms using or planning to use AI

Footnotes

• Source: Bank of England (2024).

We want firms to use AI to improve their efficiency, productivity, and to ensure the UK remains a leading financial centre. Currently, firms are adopting AI across a range of use cases, although evidence suggests that these are skewed towards those with lower materiality (62% of use cases, compared to 16% for higher materiality).^{footnote [38]} Respondent firms indicate they are predominantly using AI to optimise their internal processes, for cyber security, and for fraud detection. These use cases suggest that greater and more material adoption of AI could improve firms’ productivity. For example, firms could reduce their costs by automating routine tasks that could be performed by AI, such as monitoring fraudulent transactions at scale, or by enabling workers to leverage generative AI (GenAI) tools across a range of tasks. One study estimates that over the next 15 years GenAI could bring productivity gains of up to 30% to the banking and insurance sectors, and to firms operating in capital markets.^{footnote [39]} Such productivity gains could free up workers’ time to focus on revenue-generating activities that may be harder to automate, while also enabling firms to better target customers with tailored products and services.^{footnote [40]} At an aggregate level, these improvements could enable the people of the UK benefit from increased productivity and economic growth.

It is important that there is the right soft infrastructure for firms to make full use of AI responsibly. Increased adoption could see highly autonomous AI systems in high-risk use cases that are not well understood, unaccountable, and prone to exacerbating risks in the financial system, with knock-on effects for economic stability.^{footnote [41]} As regulators, we need to explore whether our frameworks are appropriate for such models, that we have the appropriate guidelines and guardrails in place to support adoption, and to manage risks to the financial sector, particularly because it is difficult to retrospectively address risks once usage reaches systemic scale.^{footnote [42]}

We are working proactively to ensure that the firms we regulate, and the wider financial system, can make safe and effective use of increasingly complex forms of AI. We have undertaken a programme of work over recent years to understand how best to enable the responsible use of AI in the financial system, which we outline in further detail below. Overall, we judge our regulatory framework has proven to be well equipped to support regulated firms’ use of AI so far. However, we keep our approach under review given rapid innovations in AI, particularly large language models (LLMs) and GenAI. We recognise that the rapid pace of innovation may require us to undertake new work on microprudential, financial stability, and monetary stability risks. We are also exploring how AI can help us improve our internal capabilities, as outlined in Box D.

Our approach to enabling responsible AI adoption in the financial system

Engaging with innovators, including through experimentation

What we have done:

• We run surveys jointly with the FCA on the adoption and use of AI in financial services in 2019, 2022, and 2024.^{footnote [43]}
• From 2020 to 2022, with the FCA, we ran the AI Public-Private Forum (AIPPF), which examined the challenges of using AI within financial services and opened dialogue between the public and private sectors on this topic. It concluded that continuous engagement between industry and public authorities was crucial to navigate these challenges.
• In 2024, CMORG established an AI Taskforce to support the financial sector’s ability to identify and respond to emerging risks posed by widespread adoption of AI technologies.^{footnote [44]}
• In May 2025, following on from the AIPPF, we launched the AI Consortium. Co-chaired with the FCA, it is a group of AI experts, providing a platform for public-private engagement to gather input from stakeholders on the capabilities, development, deployment, and use of AI.

What we will do:

• Members of our AI Consortium will explore specific challenges and risks such as the growing reliance on third-party providers, increased use of similar AI models that could amplify systemic vulnerabilities, and the explainability and transparency of AI models.^{footnote [45]}
• Further engagement with industry participants will inform the FPC’s AI monitoring framework in the form of both market and supervisory intelligence.^{footnote [46]}
• We will engage with regulated firms further to understand how we can support adoption.
• We will explore future opportunities to supplement our engagement with insights from AI experimentation.
• In our next iteration of the AI Survey, we plan to increase responses from currently underrepresented sectors, and to ensure it continues to provide financial stability-relevant insights.

Adapting the execution of our core functions

What we have done:

• We have been working to understand how developments in AI and its adoption in the financial system might impact financial stability in the UK. In April 2025, the FPC published its Financial Stability in Focus (FSiF): Artificial intelligence in the financial system, which explores financial stability-related risks in detail.

What we will do:

• We are building out our proactive approach for surveillance of AI adoption and use, to ensure we can continue to identify emerging risks. This will allow the FPC to understand if any systemic risks develop and to ensure that any risk mitigations are calibrated appropriately to support the responsible adoption of AI.
• Wider adoption of AI beyond financial services could influence long-term features of the economy such as productivity growth and the equilibrium interest rate and, by implication, impact our monetary policy objective.^{footnote [47]} We will undertake further work to understand better how AI adoption and use cases – such as agentic AI – are transforming the wider economy, which will feed into our modelling and forecasting approaches.^{footnote [48]}

Identifying, reviewing, and removing undue barriers to innovation

What we have done:

• In 2022, along with the FCA, we published a discussion paper (DP) 5/22 – on AI and machine learning (ML) in financial services, which sought views on whether the existing regulatory framework is sufficient to address the risks and harms associated with AI. We believe our regulatory framework has proven to be well equipped to capture regulated firms’ use of AI. Feedback we received from DP 5/22 confirms this, which we published in a feedback statement (FS) 2/23 – AI and ML.

What we will do:

• Some firms’ responses to DP 5/22 highlighted that live regulatory guidance and examples of best practice could be helpful. We are therefore open to exploring further whether AI-specific guidance for firms could be beneficial. We endeavour to strike the right balance between giving firms the confidence they need to invest, while providing enough flexibility for innovation to flourish. More generally, we will need to consider how compatible our approach is with autonomous, evolving models with the potential for decision-making capabilities.^{footnote [49]}
• Responses to DP 5/22 also highlighted a lack of clear, widely applicable standards around the data that AI models are trained on.^{footnote [50]} There are cross-sectoral standards on the protection of personal data (eg, UK GDPR), cross-sectoral and finance sector-specific standards on information security (which cover the confidentiality, integrity, and availability of data), and on the management of data risk for financial firms.^{footnote [51]} However, we may need to do more, such as ensure that firms are training AI models on high-quality, unbiased input data, while also ensuring they understand how model behaviour is responding to changes in particular aspects of that training data or where models are particularly dependent on certain segments of training data.^{footnote [52]} This is an area where we plan to seek views from firms.

Collaborating with domestic and international authorities

• In 2025, the Bank and the UK’s AI Security Institute began collaborating to better understand potential financial stability risks involving frontier AI agents.
• We are contributing to international discussions on AI and its implications for financial services with peer regulators internationally. For example, the PRA acts as a co-chair of the International Association of Insurance Supervisors (IAIS) AI workstreams, helping provide guidance and standards to support national regulators and supervisors manage AI-related risks effectively.^{footnote [53]} We have contributed to the Financial Stability Board’s (FSB) report on the financial stability implications of AI, as well as the G7 Cyber Experts Group (CEG) on AI.^{footnote [54]}

Distributed ledger technology

DLT offers the possibility fundamentally to rewire parts of the financial system to unlock a range of beneficial outcomes, both for private actors and the Bank’s objectives. DLT enables the creation of common shared ledgers which can be updated near-simultaneously across all parties in a financial transaction. It could reduce frictions and inefficiencies with 24/7 operations and near-instant settlement, as well as by reducing the number of financial intermediaries and the cost of post-trade processing. For example, stablecoins built on DLT networks may already be being used at scale by individuals and businesses around the world for faster, cheaper cross-border payments.^{footnote [60]} The technology could also allow for certain functions to be built into financial contracts through automation, such as making coupon payments on bonds. Tokenisation of assets and money (digital representation of financial assets using DLT) and smart contracts allow for greater programmability and fractionalisation of assets – this can deepen existing markets, unlock new ones, and change how assets, capital, and balance sheets can be mobilised within the financial system – making transactions cheaper, faster and more efficient. These infrastructures have the potential to be more operationally resilient than current legacy systems. While DLT may not universally have benefits over traditional ledgers, there is growing evidence that it can further improve the effectiveness and efficiency of certain aspects of financial markets, and support the introduction of new functionalities, enabling better services to be provided within the financial system. This could also contribute to economic growth and competitiveness, consistent with Government objectives.

Given the potential benefits to private actors, industry is moving from experimentation to live market deployment in various use cases and asset classes. Many market participants, including financial institutions and central banks, are conducting experiments and initiatives to explore DLT and its functionalities. This includes exploring its applications in the tokenisation of real-world assets and considering how these assets can be transferred and utilised as collateral. These efforts range from proof-of-concept to full market deployment, across clearing, settlement, payments, and asset issuance. In line with these explorations, the Bank is also working on digitalisation and new forms of money and payments, where we are contributing to efforts to improve market functionality and efficiency by using new and innovative technologies and data.^{footnote [61]}

There are several obstacles to widespread industry adoption of DLT and some of these require collective industry co-ordination to overcome. Key barriers to scaling-up these solutions include high upfront costs, lack of interoperability between platforms, lack of suitable forms of digital money for settlement assets, and legal and regulatory frameworks that may be inconsistent and not entirely suited to digital assets, particularly for cross-border initiatives. This could create co-ordination issues and a first-mover disadvantage, potentially fragmenting liquidity, especially if platforms are not interoperable, and make DLT-based markets less efficient than those using traditional technology. The Bank is considering how regulatory and legal frameworks can support the responsible adoption of DLT, as well as the usability of new forms of digital assets and digital money through various initiatives, which we have set out in the ‘What have we done’ section below. These are consistent with efforts to facilitate innovation and to advance digitally enabled financial markets, including as set out in the UK Government’s Wholesale Financial Markets Digital Strategy.

Without proactive intervention by central banks, there is a risk that the private sector inadvertently adopts DLT in a way that delivers outcomes that undermine financial stability. It is important that the efficiency gains offered by the technology are not achieved at the expense of the resilience of the financial system. For example, we must avoid unwarranted fragmentation in the financial system through interoperable infrastructure, across DLT-based platforms and between DLT and traditional systems. The private adoption of DLT without consideration for interoperability could lead to ‘walled gardens’ that fragment the financial system and create risks and inefficiencies such as liquidity fragmentation.^{footnote [62]} Widespread adoption of public permissionless platforms for core functions could result in systemic vulnerabilities if the appropriate governance, risk management, and assurances for settlement finality are not in place to manage these risks.

We are actively engaging on DLT adoption by the private and public sectors and intervening where necessary. Over the past few years, the Bank has launched a series of initiatives to deepen our practical understanding of DLT, assess its implications for the financial system, and respond to emerging developments in this space. This is a part of our ambition to support innovation in the payments landscape, both as an infrastructure provider – with the renewed RTGS system and further plans to continue to enhance it – and in an effort to provide a clear, predictable, and proportionate regulatory framework.^{footnote [63]}

Our approach to enabling responsible DLT adoption in the financial system

Engaging with innovators, including through experimentation

What we have done:

• In April 2023, we concluded Project Meridian, an experiment with the Bank for International Settlements (BIS) Innovation Hub (IH) London Centre, that showed that enabling conditional, near-instant transfer of ownership and funds via synchronisation could improve the housing transaction process. The synchronisation operator in the experiments used DLT to co-ordinate the simultaneous exchange of funds and assets across different systems, such as RTGS and asset ledgers. Project Meridian FX was subsequently launched to test synchronised settlement for foreign exchange transactions. It tested the interoperability between wholesale payment infrastructures (including those based on DLT) across jurisdictions.
• The Bank, alongside six other central banks and the BIS, is participating in Project Agorá, a public-private initiative to explore how tokenised commercial and central bank money can be integrated on a unified, programmable ledger to enhance the efficiency and functionality of wholesale cross-border payments.

What we will do:

• We recently launched the DLT Innovation Challenge with the BIS IH London Centre. This programme engages with the private sector to better understand the implications of incorporating DLT into wholesale central bank settlement. Through this, we will look to determine if wholesale central bank money can be securely transacted and settled on external, programmable ledgers not controlled by the central bank.

Adapting the execution of our core functions

What we have done:

• We have worked to ensure that central bank money can interact with new technologies like DLT, which we outline in more detail in our approach to innovation in money and payments. We finished a programme to renew our RTGS service, known as RT2, in April 2025, improving resilience, enhancing functionality, and providing a strong platform for further change. We will continue to modernise RTGS. Since introducing an Omnibus account policy in 2021,^{footnote [64]} we have become the first central bank to have onboarded a private DLT-based payment system (Fnality).^{footnote [65]}

What we will do:

• As part of the future roadmap for RT2, the Bank is working closely with industry to design and introduce a synchronised settlement interface that will allow RTGS to interoperate with other external ledgers, including those based on DLT. These platforms could include overseas RTGS systems and other asset ledgers such as land registries, to support more integrated financial transactions. We plan to launch a synchronisation lab in 2026 to enable potential synchronisation operators to test real-world use cases with our planned functionality. Dependent on the success of this, we intend to deliver synchronisation into production as soon as we can. Additionally, extended RTGS settlement hours are being considered to enable seamless integration of central bank money into ‘always-on’ payment solutions, fostering innovation and improving operational resilience. We are also planning a series of further experiments in wholesale settlement, exploring whether platforms based on DLT or other emerging technologies could offer capabilities beyond RTGS synchronisation to support the development of next-generation innovative use cases.
• DLT, alongside other innovations such as mobile banking and digital wallets, have changed the landscape for retail payments. We are working on the future of UK retail payments by working on a regulatory regime for retail stablecoins, assessing the case for a UK retail central bank digital currency, and working alongside HMT and other regulators to deliver the next generation of UK retail payments infrastructure – refer to Box E for more detail.

Identifying, reviewing, and removing undue barriers to innovation

What we have done:

• Stablecoins and other forms of digital money are a rapidly evolving area of the financial system where regulatory clarity will be important to ensure safety by design. The Bank and the FCA have previously sought feedback on the proposed approach to regulating stablecoins. We published a DP setting out a proposal for a regulatory regime for systemic payment systems using stablecoins and related service providers and the PRA issued a Dear CEO letter on innovations in the use by deposit-takers of deposits, e-money, and regulated stablecoins.
• In September 2024, we launched the DSS with the FCA, providing a regulated, live environment designed to explore how developing technologies could be used by firms involved in the key functions of FMIs such as the issuance, trading, and settlement of digital securities using DLT among other technologies. The DSS approach will allow us to ensure regulation can evolve as innovation takes place. Over a dozen firms have entered the DSS to date, ranging from fintechs to established financial market infrastructure providers and PRA-supervised firms, looking at use cases in established assets such as corporate bonds as well as new opportunities that technologies unlock.^{footnote [66]}

What we will do:

• We will consult on the proposed regulatory regime for systemic stablecoins in Q4 2025.
• We are engaging with banks to understand whether any potential regulatory response is needed to facilitate tokenised commercial bank deposits. The Bank’s broader interest in innovation in money and payments is outlined in Box E.
• The Bank will leverage experimentation in the DSS to better understand regulatory barriers that limit the use of tokenised assets in DLT-based FMIs. We are also exploring how regulated stablecoins can be utilised as the settlement asset for wholesale financial market transactions in the DSS.
• We are also developing our approach to implementing the Basel standard for the prudential treatment of cryptoasset exposures in the UK.
• The Bank will consider industry’s views on permitting tokenised assets as eligible collateral, including the risks and benefits, and the barriers that currently exist to their use, in response to the discussion section in our recent consultation paper on the resilience of CCPs.

Collaborate with domestic and international authorities

What we have done:

• We engage internationally through multiple fora, including through the FSB and BIS Committee on Payments and Market Infrastructures (CPMI), to ensure that our policy is informed by and contributes to global best practice. We actively contributed to the FSB’s High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements and to the work of standard setting bodies, for example, CPMI-IOSCO’s guidance on the application of the Principles for FMIs to systemically important stablecoin arrangements. More broadly, we have also supported and contributed work to further understand the implications of tokenisation, such as the BIS-CPMI report to the G20 on Tokenisation in the context of money and other assets: concepts and implications for central banks, and the FSB’s report on the Financial Stability Implications of Tokenisation.
• We have joined the Monetary Authority of Singapore Global Layer 1 project, which is looking to explore the development of a blueprint for interoperable blockchain infrastructure for financial markets. Through this participation, we can learn and share insights and shape the policy dimensions of such infrastructure. A globally aligned approach is important to support the inherently cross-border nature of our work.
• Since June 2021, we have hosted the BIS IH London Centre, which is part of the global network of innovation hubs operated by the BIS. The London Centre has contributed to the development and execution of key projects that are shaping our future work on financial infrastructure.

What we will do:

• The UK Government is undertaking the DIGIT pilot, which will see debt being issued and settled on a DLT platform.^{footnote [67]} We are collaborating on this initiative and DIGIT will be issued on a platform hosted within the DSS.
• Internationally, we encourage and will contribute to assessments of the increasing role of stablecoins for payment and settlement purposes and their impacts on financial stability. We will continue to work with other authorities to further explore the potential and impact of tokenisation on the broader financial system. This includes CPMI’s work on the considerations for central banks on tokenisation in the context of money and other assets, which will explore the impact of tokenisation on the role of central bank money, commercial bank money, and non-bank private money.

Quantum computing

Quantum computing could usher in the next major technological leap in financial services in the coming decade. Quantum computing uses the laws of quantum mechanics to perform computations that are too complex for classical computers. This could enable an exponential increase in computational power at a time when demand is rising significantly across industries. By harnessing quantum algorithms that have already shown superior performance – such as integer factorisation and solving certain systems of linear equations – it can enhance our ability to tackle problems that are currently beyond reach.^{footnote [69]} It may also improve the functionality of existing AI/ML models, enabling deeper insights, faster training, and more adaptive decision-making.^{footnote [70]}

There is considerable uncertainty around how quickly quantum computing will materialise. Quantum computing capabilities are still in the early stages of development, particularly in comparison to AI and DLT. While some industry estimates suggest that practical implementation of quantum could take decades, rapid technological breakthroughs, such as progress towards quantum error correction^{footnote [71]} and scalable architectures,^{footnote [72]} are occurring that may have the potential to shift implementation to years.^{footnote [73]} This means that preparations need to happen now, so that the financial system is able to adapt to a post-quantum future.

Quantum computing represents a paradigm shift in computation and information processing, which could unlock a range of beneficial use cases for firms. This includes optimising market trading and investment processes, enhancing the efficiency of payment processing, dynamic optimisation of portfolio holdings, and enhancing the security of firms’ digital communication systems.^{footnote [74]}

The adoption of quantum computing also poses risks and challenges, including but not limited to:

• Rendering asymmetric cryptography obsolete. Quantum computing could render obsolete the asymmetric cryptography algorithms underpinning the entire financial system as well as other sectors.^{footnote [75]} There are further concerns that malicious actors may be harvesting encrypted data today to decrypt it using a cryptographically-relevant quantum computer – a risk known as ‘harvest now, decrypt later’.^{footnote [76]} However, despite these challenges, quantum computing could also be used to enhance cybersecurity.
• Exacerbating third party and operational resilience risks. Inconsistent adoption of quantum-resilient cryptography may necessitate adoption of post-quantum computing cryptography across the entire supply chain. Performant post-quantum cryptography is also a significant challenge in environments where speed and efficiency are critical, such as payments systems.^{footnote [77]}
• Supercharging the risks posed by other technologies. By increasing the speed of computation and execution, quantum computing could exacerbate the potential financial stability risks posed by AI (eg, fraud or cyber risks).^{footnote [78]}
• Increasing trading/execution risks from speed and scale. Quantum computing could alter trading dynamics by enabling ultra-fast, high-volume decision cycles, often executed via cloud-based quantum back ends. These bursts of activity may become misaligned with existing market microstructure, disrupting price formation, liquidity provision, and order book stability.^{footnote [79]}
• Necessitating action now to manage scale and complexity. The scale and complexity that will be required to prepare for migration to a post-quantum future emphasises the need for work now. Much like the transition to LIBOR to new risk-free rates, this will require sustained effort and planning by firms and by us as the central bank.

Our current work on quantum computing marks the start of a commitment to navigating its transformative potential and building out a comprehensive programme of work. As quantum capabilities evolve, we will need to continue to undertake more work to deepen our understanding of the full spectrum of benefits and risks associated with greater adoption.

Our approach to enabling responsible quantum computing adoption in the financial system

Engaging with innovators, including through experimentation

What we have done:

• We have been engaging with firms, through CMORG, and the FCA to understand firms’ quantum readiness, which has helped us begin to map the practical implications of quantum technologies across the financial services sector. In addition to our engagement with financial firms, we have also begun to build our relationships with the quantum technology ecosystem, other peers and regulators, and academics working in this nascent field.

What we will do:

• We will assess the many opportunities that quantum computers will offer, not just in terms of their capabilities for enhancing existing processes, but also in terms of entirely new forms of computation, products, and markets.

Identifying, reviewing, and removing undue barriers to innovation

What we have done:

• We have developed risk scenarios for post-quantum threats, including encrypted data harvesting and quantum-enhanced trading, and we are piloting a supervisory briefing on quantum risks.

What we will do:

• We will continue to build our understanding of the potential opportunities and risks posed by quantum computing for the financial sector, its implications for our objectives, our regulatory framework, and our supervisory priorities, similar to the work we have undertaken on AI.
• We have begun and will continue to build capabilities within the PRA to enable effective engagement with firms and the sector on a post-quantum future. We will encourage upskilling within the financial system to raise awareness of the potential risks posed by quantum computing.

Collaborating with domestic and international authorities

What we have done:

• The Bank co-chairs the G7 CEG with the US Department of the Treasury, focusing on co-ordinating cybersecurity and strategy across the G7. Recent work includes publishing the G7 Cyber Expert Group Statement on Planning for the Opportunities and Risks of Quantum Computing.

What we will do:

• We will continue to work closely with domestic authorities and international peers, including the National Cyber Security Centre, National Quantum Computing Centre, G7, Organisation for Economic Co-operation and Development, and BIS.