Bank of England Governor Andrew Bailey warned that US-based stablecoins could destabilize the UK during a financial crisis. He said the risk underscores an urgent need for global regulatory coordination to prevent cross-border financial instability.
The cross-border risk from US stablecoins
Bailey's warning targets a specific vulnerability. Stablecoins pegged to the US dollar are widely used for trading and payments, but their issuers operate mostly outside British jurisdiction. In a crisis, a run on a major US stablecoin could spill over into UK markets, disrupting liquidity and confidence.
“The potential for US stablecoins to destabilize the UK in a crisis is real,” Bailey said. His remarks come as regulators in multiple countries race to craft rules for the fast-growing sector. Without coordinated oversight, he argued, a shock originating in one jurisdiction could quickly infect others.
Bailey's call for coordinated rules
The governor did not single out any specific stablecoin project. Instead, he stressed the systemic nature of the threat. “We need global regulatory coordination to mitigate these risks,” Bailey said. He pointed to the Bank of England's ongoing work with international bodies like the Financial Stability Board and the Basel Committee.
Britain's own stablecoin regulation is still taking shape. The Treasury has proposed bringing fiat-backed stablecoins under the Financial Conduct Authority's remit. But Bailey's comments suggest that unilateral action may not be enough. A stablecoin that is regulated in the US but not in the UK could still cause trouble, he implied.
What comes next
The Bank of England has not set a specific timeline for new rules. Bailey's warning is likely to feature in upcoming discussions among G20 finance officials and central bankers. The question now is whether global coordination can keep pace with the crypto market's speed. Without it, the UK remains exposed to risks it does not fully control.
