The Bank of England’s Deputy Governor, Sarah Breeden, has warned that weaker stablecoin regulations in the UK could pose a threat to financial stability and even lead to a credit crunch.
“We have a different set of risks to manage as we transition to bringing in this new form of money,” Breeden told Reuters on Tuesday.
Her comments followed the BOE’s consultation paper on stablecoins, which drew criticism from industry leaders for taking a stricter stance compared to the United States.
Controversy Over Stablecoin Holding Limits
A key point of contention in the BOE’s proposal is a rule limiting stablecoin holdings to £10,000 for individuals and £10 million for most businesses.
Breeden defended the move, stating it would “halve the stress” on banks and credit creation by reducing the risk of large-scale deposit withdrawals into stablecoins.
However, she did not specify when such caps might be lifted, leaving questions about the rule’s long-term impact on the industry.
Stablecoin Growth and Global Coordination
The stablecoin market has surged to $312 billion in 2025, prompting regulators worldwide to craft new frameworks following U.S. President Donald Trump’s signing of the GENIUS Act earlier this year.
The UK’s regulatory direction gained momentum in September when Chancellor Rachel Reeves met U.S. Treasury Secretary Scott Bessent to strengthen cross-border coordination on crypto policy.
BOE Proposes 40% Asset Backing Requirement
Breeden also defended the BOE’s proposal that stablecoin issuers must hold 40% of their reserves with the central bank — without earning interest — as a safeguard against liquidity risks.
She referenced Circle’s USDC depegging in March 2023, when $3.3 billion of reserves were locked in the collapsed Silicon Valley Bank, to justify the measure.
The central bank stated it remains open to feedback and plans to finalize the new regime in 2026.
Under the proposal, the BOE would oversee stablecoins used for everyday payments, while the Financial Conduct Authority would regulate those used for trading.
Industry Reactions and Market Impact
Coinbase and BVNK, one of the UK’s most prominent stablecoin firms, ended discussions over a $2 billion partnership on Tuesday.
The deal’s collapse could slow stablecoin adoption in the UK, at least in the short term, as firms reassess regulatory uncertainty.
Breeden, however, maintains that the BOE’s cautious approach is vital for preventing systemic risk as the country transitions toward digital money integration.