Weaker stablecoin regulations in the UK could threaten financial stability and trigger a credit crunch, according to Bank of England Deputy Governor Sarah Breeden.
“We face a different set of risks as we transition to this new form of money,” Breeden told Reuters on Tuesday. Last week, she noted that the UK can keep pace with the US on stablecoin regulation.
The crypto industry has criticized the Bank of England’s (BOE) stablecoin consultation paper released on Monday, which proposed a comparatively strict regulatory approach relative to the US. One major point of contention is the BOE’s decision to retain its controversial limits on stablecoin holdings: £10,000 ($26,300) for individuals and £10 million ($13.1 million) for most companies.
Breeden argued that these limits would “halve the stress” on banks and reduce the impact on credit creation caused by customers withdrawing deposits to purchase stablecoins. She did not indicate when these measures might be lifted.
Stablecoins have surged into a $312 billion market in 2025, prompting countries worldwide to consider legislation following US President Donald Trump’s signing of the GENIUS Act earlier this year, which seeks to balance innovation with consumer protection.
The UK has built regulatory momentum following a September meeting between Chancellor Rachel Reeves and US Treasury Secretary Scott Bessent, in which the two countries agreed to strengthen coordination on crypto and stablecoin activities.
Breeden cites Circle-SVB incident in support of 40% backing rule
The BOE also proposed that stablecoin issuers hold 40% of the assets backing their tokens with the Bank of England, without earning interest. Breeden justified this requirement by referencing the temporary depeg of Circle’s USDC in March 2023, when around $3.3 billion of its reserves were held at the now-collapsed Silicon Valley Bank.
The BOE said it remains open to feedback and plans to finalize the stablecoin regulatory framework next year. Under the proposals, stablecoins used for daily payments would fall under BOE supervision, while the Financial Conduct Authority would regulate stablecoins used in crypto trading.
In parallel developments, Coinbase and one of the UK’s leading stablecoin companies, BVNK, agreed to part ways on a $2 billion deal on Tuesday, which could have accelerated stablecoin adoption in the UK.
