Bank of England Warns Stablecoin Rules Could Trigger UK-US Regulatory Clash

Bank of England Governor Andrew Bailey has warned that disagreements between the United Kingdom and the United States over stablecoin regulations could become a major issue in global finance. Speaking at a financial stability conference, Bailey said international regulators may soon face a difficult “wrestle” with the US government over common standards for digital assets.

Bailey, who also leads the Financial Stability Board, said stablecoins can only become a trusted part of global payments if countries agree on shared rules. He raised concerns that some US dollar-backed stablecoins may not be easily converted into cash during periods of financial stress, especially when users must rely on crypto exchanges for redemption.

UK Stablecoin Framework Differs From US Rules

The UK is currently building its own regulatory model for stablecoins. Under proposed rules, major stablecoin issuers may be required to hold at least 40% of reserves in non interest bearing accounts at the Bank of England, while the remaining funds would be invested in short-term government debt to ensure faster redemption.

In contrast, US regulation focuses on full reserve backing and monthly disclosures but does not always require direct redemption without intermediaries.

Andrew Bailey Supports Tokenized Deposits

Bailey has continued to favor tokenized bank deposits over privately issued stablecoins, arguing they offer better financial stability. His remarks come as lawmakers in the US move forward with new crypto legislation, increasing pressure for global regulatory coordination.