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Wednesday Nov 12 2025 02:10
2 min
Weaker regulations governing stablecoins in the United Kingdom pose a significant risk to financial stability and could potentially trigger a credit crunch, according to Sarah Breeden, Deputy Governor of the Bank of England. Breeden stated in an interview with Reuters that managing this new form of money involves navigating a distinct set of risks.
Her comments follow criticisms from crypto industry leaders regarding the Bank of England's recent consultation paper, which proposed a comparatively stringent approach to stablecoin regulation compared to the United States. A primary point of contention was the Bank's decision to maintain its controversial proposal limiting individual stablecoin holdings to £10,000 (approximately $26,300) and corporate holdings to £10 million (approximately $13.1 million).
Breeden argued that this measure would mitigate the strain on banks and credit creation resulting from customers withdrawing bank deposits to acquire stablecoins. She did not indicate a timeline for the potential removal of this restriction. The stablecoin market has experienced rapid growth, reaching $312 billion by 2025. Globally, nations are exploring legislation similar to the US GENIUS Act, signed earlier this year, which aims to strike a balance between fostering industry innovation and protecting consumers.
The Bank of England has also proposed measures for stablecoin issuers, requiring them to hold 40% of the assets backing their tokens with the central bank, without accruing interest. Breeden cited Circle's USDC depeg incident in March 2023, where approximately $3.3 billion of its reserves were held at the now-defunct Silicon Valley Bank, as justification for this requirement.
The Bank of England has stated it remains open to feedback and intends to finalize its regulatory framework next year. The intention is to regulate stablecoins used for daily payments, while the Financial Conduct Authority (FCA) will regulate stablecoins used in crypto trading. In related news, Coinbase and BVNK, a prominent UK-based stablecoin company, have mutually agreed to terminate a $2 billion deal, which had the potential to accelerate stablecoin adoption within the UK.
Risk Warning: This article is provided for informational purposes only and does not constitute investment advice, investment research, or a recommendation to trade. The views expressed are those of the author and do not necessarily reflect the position of Markets.com. When considering shares, indices, forex (foreign exchange), and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and may not be suitable for all investors. Leveraged products can result in capital loss. Past performance is not indicative of future results. Before trading, ensure you fully understand the risks involved and consider your investment objectives and level of experience. Cryptocurrency CFD trading restrictions may apply depending on jurisdiction.
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