On 15 October 2025, the Bank of England (BoE) published a comprehensive paper outlining its approach to innovation in artificial intelligence (AI), distributed ledger technology (DLT) and quantum computing. The BoE identified these as the three technologies with the greatest current potential to shape the UK economy and the future of financial services.
In the paper, the BoE positions itself as an active participant in this technological transformation. The paper details the BoE’s ongoing work and its plans to guide the responsible adoption of these technologies, recognising their potential to boost UK productivity and economic growth whilst flagging the importance of managing the associated financial stability risks. Ultimately, the BoE’s objective is to harness the benefits of innovation to support its objectives of monetary and financial stability and the long-term competitiveness of the UK financial system.
This post highlights four key takeaways from the BoE’s publication.
1. The BoE as a shaper of innovation, not a stifler
“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.” This is the rallying call from Sarah Breeden, the Deputy Governor for Financial Stability.
The emphasis on “responsible innovation” reflects the perennial balancing act facing the BoE in fostering technological progress whilst managing systemic risk. However, the goal is clear: to create an environment in which responsible innovation can thrive, giving firms the confidence to adopt new technologies. This includes removing undue barriers to innovation, and incentivising exploration and responsible technology adoption across the sector.
The BoE also highlights the alignment between technological advancement and its primary and secondary objectives. By fostering the responsible adoption of emerging technologies such as AI, DLT and quantum computing, the BoE seeks to strengthen the resilience and stability of both the UK economy and its financial sector, while enhancing competitiveness and supporting innovation for the benefit of the wider economy.
2. AI isn’t hypothetical – it’s already embedded in the UK’s financial system
AI is increasingly integrated across the UK financial services sector. The paper references the BoE’s 2024 joint AI survey with the FCA, which found that 75% of UK financial firms are already using AI, with a further 10% planning adoption within the next three years. Firms are also experimenting with more advanced models, including foundation models, which account for 17% of current use cases.
The BoE’s main concerns relate to operational and systemic risks, including vulnerability to cyberattacks, reliance on third- and fourth-party providers, correlated outcomes across markets and model- and data-related risks. Increased adoption could see highly autonomous AI systems deployed in high-risk areas that are not fully understood, lack accountability and may amplify systemic risks with potential implications for economic stability. The BoE emphasises the importance of ensuring that existing frameworks remain appropriate and that clear guidelines and safeguards are in place to support responsible adoption, noting that retrospective mitigation becomes increasingly difficult once AI usage reaches a systemic scale.
Key initiatives from the BoE to address these risks include:
AI Consortium: co-chaired with the FCA, this platform enables public-private engagement on AI capabilities, development and use. The Consortium will explore challenges such as reliance on third-party providers, widespread use of similar models that could create systemic vulnerabilities and the explainability and transparency of AI system;
proactive surveillance: the BoE is building out its monitoring of AI adoption and use, to ensure it can continue to identify emerging risks; and
- economic impact assessment: further work will examine how AI adoption, including agentic AI, is transforming the wider economy, feeding into the BoE’s modelling and forecasting.
3. DLT is moving from pilots to production
While DLT discussions often focus on cryptoassets, the BoE’s perspective is much broader and more pragmatic. DLT is being explored as a potential backbone for financial infrastructure, offering greater efficiency and operational resilience compared with legacy systems. The BoE has engaged in multiple projects to test how DLT can integrate with central bank money and existing settlement systems. It is also supporting the Digital Gilt Instrument pilot for government debt issuance. The striking takeaway is the extent to which DLT has become institutionalised. Far from an experiment, it is increasingly embedded in the UK’s core financial plumbing. The BoE notes, however, that the challenge will be to avoid unnecessary fragmentation through interoperable infrastructure – both across DLT-based platforms and between DLT and traditional systems.
To address this, the BoE is taking concrete steps to ensure central bank money can interact seamlessly with emerging technologies. A key initiative is the recently launched DLT Innovation Challenge, which engages the private sector to better understand the implications of incorporating DLT into wholesale central bank settlement. Through this, the BoE aims to assess whether wholesale central bank money can be securely transacted and settled on external, programmable ledgers not controlled by the central bank. Further, the BoE’s renewal of the Real-Time Gross Settlement (RTGS) service will include a synchronised settlement interface, enabling the interoperability of RTGS with external ledgers, including those built on DLT. In 2026, the BoE plans to launch a synchronisation lab to allow potential operators to test real-world use cases with the BoE’s planned functionality. More broadly, the BoE and the FCA have launched the Digital Securities Sandbox (DSS), a regulated, live environment designed to explore how emerging technologies – including DLT – could support key financial market infrastructure functions such as the issuance, trading and settlement of digital securities.
Looking ahead, the BoE will consult in Q4 2025 on the proposed regulatory framework for systemic stablecoins and will consider industry feedback on permitting tokenised assets as eligible collateral.
4. Quantum computing is on the regulatory radar
The BoE treats quantum computing as an immediate strategic concern. Its warning is unusually direct: “Quantum computing could render obsolete the asymmetric cryptography algorithms underpinning the entire financial system as well as other sectors.”
The threat is already being exploited through “harvest now, decrypt later” attacks – stealing encrypted data today to decrypt when quantum capability arrives. This means payment systems secure now could be compromised in the future.
The threat extends beyond cryptography. The BoE is also concerned that quantum computing could amplify risks from other technologies, such as AI, by enabling “ultra-fast, high-volume decision cycles” that could disrupt market stability.
In response, the BoE has begun building post-quantum risk scenarios, including encrypted data harvesting and quantum-enhanced trading, and is piloting supervisory briefings on quantum risks. It is actively engaging with firms to assess their quantum readiness and to map the practical implications of quantum technologies across the financial sector. The BoE is also strengthening relationships with the quantum technology ecosystem, peers, regulators and academics working in this field. At the same time, the BoE will explore the opportunities quantum computing may bring – not only in enhancing existing processes but also in supporting the migration to a post-quantum future.
International coordination is also underway. The BoE is engaging with domestic and global partners, including co-chairing the G7 Cyber Experts Group, to develop a collective response. The message to firms is clear: the time to start planning for a post-quantum future is now.
5. Next steps
Across AI, DLT, and quantum computing, the BoE is balancing the promise of enhanced efficiency, resilience and market development with the need to manage operational, systemic and security risks.
For firms, engagement with the BoE’s initiatives is central to staying ahead in a rapidly evolving financial landscape. Looking forward, firms should assess their technology strategies, strengthen governance and risk frameworks and actively participate in pilot programs and consultations. By doing so, they can not only meet emerging regulatory expectations but also help shape a resilient, innovative and globally competitive UK financial system.
