Bank of England flags stablecoin rule clash with U.S., warns of UK run risk

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Bank of England stablecoin warning

Highlights

Bank of England Governor Andrew Bailey warns of potential runs on dollar-pegged stablecoins and increased UK market risk due to weaker U.S. redemption protections.
UK stablecoin regime proposes individual and business holding caps (£20,000 and £10 million) and mandates at least 40% of reserves held at the Bank of England, with draft rule revisions expected in June.
Policy divergence grows as the U.S. aligns stablecoin rules with the GENIUS Act and Europe, led by Christine Lagarde, challenges stablecoin integration, intensifying transatlantic regulatory tensions.

Transatlantic divide over redemption rules

As reported by Reuters, Bailey said at a Bank of England conference on financial imbalances that international regulators face a "coming wrestle" with the U.S. over stablecoin standards if the tokens are to play a global payments role. He argues that international rules are needed because some U.S. stablecoins cannot be readily converted into dollars without going through a crypto exchange, which could weaken convertibility under stress.

Bailey, who also chairs the Financial Stability Board, says that if dollar-pegged stablecoins become widely used in cross-border payments, a market shock could send holders of tokens with weaker redemption protections toward jurisdictions with stricter standards. He warns that a run on such stablecoins could shift pressure into markets such as the UK.

The comments extend a stance Bailey has maintained for years. In July 2025, he warned major banks against issuing their own stablecoins and instead backed tokenized deposits, a model that has since been tested by six major UK banks through a live pilot of tokenized sterling deposits.

UK framework and broader European pushback

The UK is developing its own stablecoin regime alongside U.S. legislation. The Bank of England opened a consultation in November on rules for systemic sterling stablecoins, including proposed holding caps of £20,000 for individuals and £10 million for businesses, and in March signaled it may revise those limits after industry criticism, with updated draft rules expected around June.

Under the planned UK approach, systemic stablecoin issuers would need to keep at least 40% of reserves in unremunerated accounts at the Bank of England and the balance in short-term UK government debt to support rapid redemption. The U.S. GENIUS Act requires full reserve backing and monthly disclosures, but the article says it does not require holders to redeem directly with the issuer without intermediaries.

The policy split comes as Washington continues to build out its crypto framework. President Trump signed the GENIUS Act into law in July 2025, the FDIC proposed implementing rules in April, and the Senate Banking Committee is set to mark up the broader CLARITY Act on Thursday after a bipartisan compromise on stablecoin yield.

Bailey's remarks come on the same day that European Central Bank President Christine Lagarde makes a forceful case against stablecoins, arguing that even euro-denominated tokens threaten financial stability and monetary-policy transmission. Together, the interventions mark a broader European challenge to a stablecoin model taking shape largely on U.S. terms, although the Financial Stability Board's recommendations remain non-binding and U.S. willingness to align domestic crypto policy with multilateral standards is still uncertain.

Bakkt’s stablecoin payment push in cross-border remittances was previously covered in our article, highlighting its partnership with Zoth to build compliant infrastructure across the U.S., South Asia, the Middle East, and Africa. We also noted that Bakkt’s acquisition of Distributed Technologies Research aimed to strengthen its AI-based payments platform and broaden API integration to support further stablecoin adoption. Alongside these strategic moves, our analysis pointed to strong intraday volatility and a likely near-term consolidation range rather than a clear breakout.

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