Bank of England Governor Andrew Bailey warned Friday that global regulators could face a direct conflict with the United States over stablecoin oversight. Speaking at a financial conference, Bailey said cross-border stablecoin payments need shared international standards, while surging dollar-backed issuance and weak redemption structures could amplify financial stability risks during market stress.
Redemption Flaws Pose Hidden Risks
According to Bailey, some dollar-pegged stablecoins cannot easily convert into cash without going through crypto exchanges. That limitation could create severe problems when markets panic or exchanges become overwhelmed. He added that holders of hard-to-redeem stablecoins may move funds to countries with stronger protections during crises — and the UK, with its stricter regulatory framework, could absorb heavy redemption pressure.
Bailey repeated concerns that stablecoins could weaken state control over money if safeguards remain insufficient. As chair of the Financial Stability Board, he said regulators still view stablecoins as a financial stability concern.
UK Proposes Stricter Limits on Pound-Backed Stablecoins
The Bank of England released a draft framework for pound-backed stablecoins in November 2025. Under the proposal, individual holdings would face a temporary cap of £20,000 (about $25,000), while corporate balances would be limited to £10 million. Issuers must keep 40% of reserves in non-interest-bearing central bank deposits, with the remainder restricted to short-term UK government debt. The central bank said the design aims to support redemptions during stressed market conditions.
The global stablecoin market now exceeds $317 billion (CoinGecko data), with most major coins tied to the dollar and backed by Treasuries or cash reserves.
US GENIUS Act Debate Heats Up
Bailey's warning came as US lawmakers continue debating stablecoin legislation under the GENIUS Act. The Trump administration has backed the bill while promoting stablecoin adoption in financial markets. However, disagreements persist between banking groups and crypto firms over customer rewards tied to stablecoins — the latest Senate draft bans yield on idle balances while allowing other incentives. The Senate Banking Committee is scheduled for another markup session this Thursday.