Weaker stablecoin rules in the UK could risk financial stability and trigger a credit crunch, according to the Bank of England’s deputy governor, Sarah Breeden.
“We have a different set of risks to manage as we transition to bringing in this new form of money,” Breeden’s told Reuters on Tuesday. Last week, she said that the UK can keep pace with the US on stablecoin regulation.
Crypto industry leaders have criticized the BOE’s stablecoin consultation paper released on Monday, which proposed a relatively strict stance on stablecoin regulation in comparison to the US.
One of the biggest criticisms was the BOE’s decision to keep its controversial stablecoin proposal, which limits individual stablecoin holdings to 10,000 British pounds ($26,300) or 10 million British pounds ($13.1 million) for most companies.
Breeden said this would “halve the stress” on banks and credit creation caused by customers withdrawing bank deposits to buy stablecoins. She didn’t state when the measure could potentially be lifted.
Stablecoins have boomed into a $312 billion market in 2025, and nations around the world are looking to follow US President Donald Trump’s signing of the GENIUS Act earlier this year to craft similar legislation that balances industry innovation with consumer protection.
The UK built regulatory momentum from a meeting between UK Chancellor Rachel Reeves and US Treasury Secretary Scott Bessent in September, when the two countries agreed to strengthen their coordination on crypto and stablecoin activities.
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The UK’s top bank also proposed measures on stablecoin issuers, requiring them to hold 40% of the assets backing their tokens with the BOE without earning interest.
Breeden said the proposal was grounded, pointing to Circle’s USDC (USDC) temporary depeg in March 2023 when around $3.3 billion of its reserves were held at the now-collapsed Silicon Valley Bank.
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The BOE said it is open to further feedback and that it would finalize its regime next year.
It intends to regulate stablecoins used for daily payments, while the Financial Conduct Authority would regulate stablecoins used in crypto trading.
Meanwhile, Coinbase and one of the UK’s most prominent stablecoin companies, BVNK, agreed to part ways on a $2 billion deal on Tuesday, which could have boosted stablecoin adoption in the UK.
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