BoE's Bailey warns of regulatory 'wrestle' with US over stablecoin standards

Bank of England Governor Andrew Bailey warned Friday that international regulators face a “coming wrestle” with the U.S. government over stablecoin standards, marking a widening transatlantic policy rift as Washington promotes dollar-denominated stablecoins as global payments infrastructure. Speaking at a BoE-hosted conference on financial imbalances, Bailey emphasized that stablecoins can only function globally if underpinned by international standards, according to Reuters.

Convertibility and Run Risk Concerns

Bailey, who chairs the Financial Stability Board, identified a specific vulnerability in the current U.S. stablecoin landscape: some dollar-pegged stablecoins cannot be readily converted to dollars without routing through a crypto exchange, potentially limiting convertibility during a crisis. If these tokens become widely used for cross-border payments, Bailey argued, a financial crisis could trigger a flight from stablecoins with weak redemption guarantees to jurisdictions with stricter convertibility rules. “We know what would happen if there was a run on a stablecoin — they’d all turn up here,” Bailey said, referring to the UK.

UK’s Tokenized Deposits Initiative

Bailey’s stance reflects a multi-year regulatory position. In July 2025, he warned the world’s largest banks against issuing their own stablecoins, urging them to pursue tokenized deposits instead. Six major UK banks have since launched a live pilot of tokenized sterling deposits, aligning with the BoE’s preference for bank-issued digital assets over independent stablecoin issuers.

Diverging Regulatory Frameworks

The UK and U.S. are pursuing distinct stablecoin regulatory approaches. The BoE opened a consultation in November on rules for “systemic” sterling stablecoins, initially proposing holding limits of £20,000 for individuals and £10 million for businesses. Following industry pushback, the central bank signaled in March it was open to revising those caps, with updated draft rules expected around June.

Under the UK’s planned regime, systemic stablecoin issuers must hold at least 40% of reserves in unremunerated accounts at the Bank of England, with the remainder in short-term UK government debt, specifically to ensure rapid redemption. By contrast, the U.S. GENIUS Act requires 100% reserve backing and monthly disclosures but does not mandate that token holders be able to redeem directly from the issuer without intermediaries.

U.S. Legislative Timeline

The transatlantic friction reflects diverging policy trajectories. President Trump signed the GENIUS Act into law in July 2025, and the FDIC proposed implementing rules in April. The Senate Banking Committee is set to mark up the broader CLARITY Act on Thursday after a bipartisan compromise on stablecoin yield resolved a months-long legislative impasse.

European Central Bank Alignment

Bailey’s comments arrived the same day ECB President Christine Lagarde made her most direct case yet against stablecoins, arguing that even euro-denominated tokens threaten financial stability and monetary-policy transmission. Together, the speeches represent significant pushback from Europe’s two most powerful central bankers against a stablecoin regulatory regime shaped largely on U.S. terms.

International Standard-Setting Process

Whether Bailey’s framing gains traction will depend on how the Financial Stability Board’s standard-setting process unfolds. The FSB has issued stablecoin recommendations since 2020, but those guidelines are non-binding, and the U.S. has historically shown limited appetite for subordinating domestic crypto policy to multilateral frameworks.