Bank of England Governor Warns a Stablecoin Crisis Could Hit the UK First

TLDR

• Bank of England Governor Andrew Bailey says global stablecoin rules will require a “wrestle” with the US administration.
• The stablecoin market is worth over $317 billion, mostly backed by US dollars and Treasury bills.
• Bailey chairs the Financial Stability Board and views stablecoins as a potential threat to financial stability.
• He warned that in a crisis, hard-to-convert stablecoins could flood into countries like the UK with stronger convertibility rules.
• The US Senate Banking Committee has scheduled a markup of its stablecoin bill for Thursday.

Bank of England Governor Andrew Bailey warned on Friday that international regulators face a clash with the United States over how stablecoins should be governed globally.

Bailey made the comments at a conference on financial imbalances hosted by the Bank of England. He said stablecoins can only work as a global payments tool if there are shared international standards — and getting there won’t be easy.

The Trump administration has made promoting the crypto industry a priority. It has backed the GENIUS Act, which sets out a regulatory framework for stablecoin issuers and treats stablecoins as a useful tool for extending the reach of the US dollar.

Bailey, by contrast, has long been skeptical of crypto. As chair of the Financial Stability Board — an international body that coordinates financial regulation — he sees stablecoins as carrying real risk.

The stablecoin market is currently valued at over $317 billion, according to CoinGecko. Most of the largest stablecoins are pegged to the US dollar and backed by US Treasury bills and cash.

Convertibility Concerns

Bailey raised a specific concern about what happens in a financial crisis. Some US stablecoins, he said, cannot be converted directly into dollars without going through a crypto exchange. That creates a problem if markets are under stress and exchanges are unavailable or overwhelmed.

He warned that if stablecoins become widely used for cross-border payments, holders of hard-to-convert tokens could try to move them to countries that have stronger conversion rules — like the UK.

The UK is planning to put in place strong legal requirements around stablecoin convertibility, making it a potential destination for stablecoin holders fleeing a crisis elsewhere.

US Legislation Still in Progress

Back in the US, the Senate Banking Committee has scheduled a markup of its stablecoin bill for Thursday. The committee had postponed a vote on the bill in January.

The latest version of the bill bans stablecoin rewards on idle balances, but allows crypto platforms to offer other forms of customer rewards. US banking groups had pushed for a full ban on third-party platforms offering yield payments on stablecoins, but crypto and banking interests failed to reach an agreement after months of talks.

The bill, if passed, would give stablecoin issuers a clearer legal path to operate in the US — something the Trump administration is keen to deliver.

Bailey’s comments come as other international regulators are also looking at tighter oversight of stablecoins, viewing them as a lightly regulated alternative to the banking system that could carry systemic risk.

The gap between the US approach and that of other major economies means that reaching a global standard will require significant coordination — and, as Bailey put it, a wrestle.

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