- Andrew Bailey warned weak stablecoin redemption systems could increase financial stress during market disruptions.
- Bank of England proposed stricter reserve and holding limits for pound-backed stablecoins in the UK.
- Regulatory tensions may grow as the U.S. advances stablecoin legislation through the GENIUS Act.
Bank of England Governor Andrew Bailey warned Friday that global regulators could face conflict with the United States over stablecoin oversight. Speaking at a financial conference, Bailey said stablecoins used in cross-border payments require shared international standards, while growing dollar-backed issuance and weak redemption structures could increase financial stability risks during market stress.
Bailey Questions Stablecoin Redemption Risks
According to Andrew Bailey, some dollar-backed stablecoins cannot easily convert into cash without using crypto exchanges. He said that limitation could create serious problems if markets experience panic or exchanges become overwhelmed.
Bailey also warned that holders of hard-to-redeem stablecoins may move funds into countries with stronger protections during crises. He stated that the United Kingdom could absorb heavy redemption pressure because of its stricter regulatory framework.
Meanwhile, Bailey repeated concerns that stablecoins may weaken state control over money if safeguards remain insufficient. As chair of the Financial Stability Board, he said regulators still view stablecoins as a financial stability concern.
The stablecoin market currently exceeds $317 billion, according to CoinGecko data. Most major stablecoins remain tied to the U.S. dollar and backed by Treasury bills or cash reserves.
UK Proposes Stricter Reserve Rules
The Bank of England has already proposed tighter rules for pound-backed stablecoins. Under the framework released during November 2025, individual holdings would face temporary limits of £20,000.
Corporate balances would also face a proposed £10 million cap under the same framework. In addition, issuers would need to keep 40% of reserves in non-interest-bearing central bank deposits.
The remaining reserves could only enter short-term UK government debt instruments. According to the Bank of England, the structure aims to support stablecoin redemptions during stressed market conditions.
US Stablecoin Bill Advances
Bailey’s comments arrived as U.S. lawmakers continue debating stablecoin legislation through the GENIUS Act. The Trump administration has backed the bill while promoting stablecoin adoption across financial markets.
However, disagreements remain between banking groups and crypto firms over customer rewards tied to stablecoins. The latest Senate draft bans yield on idle balances while still allowing other incentive programs.
The Senate Banking Committee is scheduled to hold another markup session on the legislation this Thursday.
