Key Takeaways
- The BoE warns that weak stablecoin rules could trigger bank outflows and credit risks.
- Proposed caps and reserve requirements aim to protect financial stability.
- The BoE plans to finalize the UK’s stablecoin regime next year.
Bank of England Sounds Alarm on Stablecoin Risks
The Bank of England’s Deputy Governor, Sarah Breeden, has issued a stark warning that watering down UK stablecoin regulations could jeopardize the country’s financial stability and trigger credit disruptions. Her comments come as the BoE finalizes its long-awaited crypto framework—amid mounting industry pressure to ease restrictions.
Speaking to Reuters on Tuesday, Breeden emphasized that “a different set of risks” accompany the rise of digital currencies, underscoring the need for “strong safeguards” as the UK integrates this “new form of money” into its financial system.
Tension Between Innovation and Stability
The Bank of England’s consultation paper, released earlier this week, drew sharp criticism from crypto leaders who say the proposed framework is too restrictive compared to the U.S. Under the BoE plan, individual stablecoin holdings would be capped at £10,000 ($12,600), while companies would face a £10 million limit ($13.1 million).
Also Read: Decentralized Stablecoins and Privacy: A16z Proposes a Bold Solution
Breeden defended the move, explaining it would “halve the stress” on banks and credit creation caused by deposit withdrawals into stablecoins. Although the BoE hasn’t confirmed when or if the limits will be lifted, Breeden insists that tighter controls are necessary to avoid sudden liquidity shocks.
This comes as global stablecoin adoption has surged past $312 billion in 2025, driven by innovations following the U.S. GENIUS Act, signed by President Trump earlier this year. The UK has also been deepening regulatory coordination with Washington after September’s high-level meeting between UK Chancellor Rachel Reeves and U.S. Treasury Secretary Scott Bessent.
Circle’s USDC Collapse Fuels Caution
Breeden pointed to the Circle–Silicon Valley Bank (SVB) incident in 2023—when USDC briefly depegged after $3.3 billion in reserves were frozen—as justification for requiring stablecoin issuers to hold 40% of reserves with the BoE. These funds would not earn interest but serve as a stability backstop.
Also Read: What Is a Stablecoin?
The central bank aims to finalize its stablecoin regime by 2026, dividing oversight between the BoE (for payments) and the Financial Conduct Authority (FCA) (for trading-related coins).
Meanwhile, a $2 billion deal between Coinbase and UK-based BVNK collapsed this week, potentially delaying broader stablecoin adoption.
Conclusion
As the UK races to keep pace with U.S. crypto reforms, Sarah Breeden’s warning underscores the fine line between fostering innovation and protecting the economy. With stablecoins rapidly entering mainstream finance, regulatory discipline—not deregulation—may prove the key to long-term trust and stability.
