Bank of England Sets Out Framework for Responsible Innovation

The Bank of England ("BoE") outlined a policy framework for fostering "responsible innovation" in artificial intelligence ("AI"), distributed ledger technology ("DLT"), and quantum computing.

In the report, the BoE reaffirmed its technology-agnostic regulatory stance, but underscored that it will intervene where specific technologies pose novel risks to its statutory objectives. The BoE explained that its approach is not to slow innovation, but to shape it responsibly—encouraging adoption while safeguarding stability and public trust.

The BoE argued that AI, DLT, and quantum computing could drive a new wave of productivity growth comparable to past breakthroughs such as electricity and the internet. The BoE explained that technological change directly influences its core mandates—monetary stability, financial stability, and firm soundness. The BoE said innovation can enhance resilience through improved risk management and efficiency but cautioned that poorly managed adoption could introduce new vulnerabilities.

The BoE cited projections that AI could nearly double the UK's GDP growth rate by 2035 and that DLT could save billions annually in clearing and settlement costs. The BoE also emphasized that responsible adoption is critical to preventing risks such as over-automation, inequality, or market concentration. The BoE added that adoption is already significant, with roughly three-quarters of UK financial firms using AI and more planning to adopt within three years. The BoE said the policy framework supports the UK government’s vision for a globally competitive financial center driven by technology and responsible growth.

The BoE described a three-part framework for supporting innovation through its "hard," "soft," and "convening" infrastructure. The BoE said its hard infrastructure includes the Real-Time Gross Settlement service, now being upgraded to connect with DLT platforms for synchronized settlement. The BoE said its soft infrastructure encompasses regulation, policy, and standards that guide safe adoption, including work on AI governance and outsourcing risk. The BoE added that through its convening role, it collaborates with innovators and other authorities to ensure experimentation occurs within a secure regulatory perimeter. The BoE also highlighted the UK government’s National Payments Vision and its leadership in new governance bodies.

The BoE detailed its active work across AI, DLT, and quantum computing. The BoE said it is addressing AI-related risks from third-party dependencies, model transparency, and systemic adoption while deploying AI internally. The BoE reported progress on DLT initiatives to improve interoperability between traditional and tokenized financial systems through cross-border settlement pilots, the Digital Securities Sandbox, and the onboarding of Fnality—a DLT-based payments system. The BoE added that it is assessing quantum-related risks to cryptography and operational resilience, coordinating with the G7 Cyber Experts Group and domestic cybersecurity bodies to prepare for a post-quantum future.

The BoE recommended firms prepare by (i) strengthening governance including: readying control frameworks for data lineage, model validation, third-party assurance, and incident response; (ii) keeping pace with evolving domestic and international standards; (iii) engaging in BoE-led initiatives like the DSS where relevant; and (iv) clearly documenting how innovation initiatives meet safety, soundness, and financial stability objectives.