“Stablecoins may promise stability, but weak rules could do the opposite,” cautioned BoE Deputy Governor Sarah Breeden.
Sarah Breeden, Deputy Governor of the Bank of England, has cautioned that lax stablecoin regulations might jeopardise the UK’s financial stability and raise the possibility of a credit crunch.
She advised politicians not to relax the regulations as the country transitions to new kinds of digital money.
Breeden went on: “We have a different set of risks to manage as we bring in this new form of money.”
Her views come as the UK strives to keep up with the United States, after President Trump’s GENIUS Act, which aims to improve crypto and stablecoin regulation.
The Bank of England’s consultation paper has prompted criticism over its rigorous approach. It restricts stablecoin ownership to £10,000 ($26,300) for individuals and £10 million ($13.1 million) for most businesses.
Breeden noted that this strategy will “halve the stress” on banks, avoiding a significant decline in loan production.
With stablecoins now a $312 billion market, regulators worldwide are seeking to balance innovation with safety.
Breeden also defended the proposal requiring issuers to keep 40% of reserves with the BoE, referencing the USDC depeg incident in 2023 when $3.3 billion was trapped at Silicon Valley Bank.
The Bank of England plans to finalize its stablecoin rules next year. The BoE will regulate stablecoins used for daily payments, while the Financial Conduct Authority (FCA) will oversee those used in crypto trading.
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