Central banks don’t usually sound like they’re pitching at a crypto conference. But Sasha Mills, Executive Director for Financial Market Infrastructure at the Bank of England, made a case at City Week 2025 on July 2 that could have come straight from a DeFi panel: central bank money needs to go onchain.

Mills argued that onchain-compatible central bank money is essential for wholesale markets. The logic is straightforward. If financial markets are increasingly settling on distributed ledgers, the risk-free asset underpinning those settlements needs to live there too.

What the Bank of England is actually building

The most significant initiative is RT2, the Bank’s renewal of its Real-Time Gross Settlement system. RT2 will include a synchronization interface designed for conditional settlement against external DLT ledgers.

The Bank is also running a DLT Innovation Challenge in collaboration with the Bank for International Settlements. The project is experimenting with different methods of settling wholesale central bank money on distributed ledgers.

Then there’s the Digital Securities Sandbox, which the Bank is expanding for initiatives like the DIGIT digital gilt pilot. Digital gilts are tokenized versions of UK government bonds.

Mills also flagged tokenized deposits as a particularly promising innovation. These would enable real-time onchain settlement while preserving the traditional protections that depositors expect, including deposit insurance and the credit creation processes that keep banking systems functional.

Stablecoins get a seat at the table

The Bank of England is planning a regulatory regime specifically for stablecoins deemed systemically important, with consultations expected later in 2025. Under the proposed framework, systemic stablecoin issuers would be granted access to Bank of England deposit accounts. The discussions have centered on transitional limits of £10,000 to £20,000 for individuals and £10 million for businesses.

Mills emphasized throughout that the guiding principle is “same risk, same regulatory outcome.” If a tokenized deposit carries the same risk profile as a traditional one, it should face the same rules.

What this means for investors

If the Bank of England follows through on granting deposit account access to systemic stablecoin issuers, it creates a two-tier stablecoin market. Issuers with BoE backing will carry a credibility premium that unregulated competitors cannot match.

The RT2 synchronization interface removes one of the biggest friction points for institutional adoption of blockchain-based finance once it goes live. The Bank of England is also collaborating with the BIS at the frontier of central bank experimentation with DLT. Investors watching this space should track the stablecoin consultation timeline later in 2025 as the next concrete milestone.