Bank of England Governor Andrew Bailey said global regulators may soon clash with the United States over how stablecoins should be governed internationally. Speaking at a conference on Friday, Bailey stressed that stablecoins can only become a meaningful part of the global payments system if countries agree on common international standards.
According to Reuters, Bailey said regulators will have to “wrestle” with the US administration on the issue, as Washington takes a more crypto-friendly approach. Under President Donald Trump, the US has pushed to expand the digital asset industry and advanced the GENIUS Act, which establishes a regulatory framework for stablecoin issuers.
In contrast, regulators in several other jurisdictions are calling for stricter oversight, arguing that stablecoins could pose risks to financial stability by acting as lightly regulated alternatives to traditional banking.
The stablecoin market is now worth more than $317 billion, data from CoinGecko shows. Most leading stablecoins are tied to the US dollar and backed by reserves such as US Treasury bills and cash holdings.
Bailey, who also chairs the Financial Stability Board, warned that stablecoins could become a threat to the broader financial system if not properly regulated.
Bailey also warned that some stablecoins may not be easily redeemable for cash without relying on crypto exchanges, raising concerns about their convertibility during periods of market stress.
He said that if stablecoins become widely adopted for international payments, dollar-backed tokens that are difficult to cash out could eventually spread into other jurisdictions, including the UK, where regulators are preparing stricter rules for stablecoin redemption.
“We know what would happen if there was a run on a stablecoin — they’d all turn up here,” Bailey said.
Meanwhile, US banking groups have been lobbying for a Senate crypto market structure bill to ban third-party platforms, including crypto exchanges, from offering yield or interest payments on stablecoins.
After months of negotiations, crypto industry representatives and banking organizations failed to reach a compromise. The latest draft of the legislation, released earlier this month, bans rewards on idle stablecoin balances but still allows crypto platforms to provide “other forms of customer rewards.”
The Senate Banking Committee, which delayed a vote on the bill indefinitely in January, is now expected to hold a markup session on Thursday.
