Bank of England governor Andrew Bailey has taken a firm position: the BOE stablecoin stance clashes with past warnings. In a recent Times interview, Bailey warned banks against issuing their own stablecoins. He argued that stablecoins could destabilize money and erode confidence in traditional bank deposits (thetimes.co.uk). This key phrase appears from the start and echoes throughout this article, offering clarity and consistency.
I’m writing this for stablecoin issuers who need to understand why the BOE stablecoin stance matters now. You rely on public trust, regulatory clarity and innovative tech. Yet the BOE stablecoin stance highlights growing tension between private issuance and central bank control. It challenges your roadmaps and regulatory planning.
Over the next sections, I’ll break down what Bailey said. Then we’ll compare that to previous warnings. You’ll see why the BOE stablecoin stance has shifted so sharply. We’ll explore what it means for issuers like you and how to adapt.
What the BOE Is Saying Now
Andrew Bailey, the Bank of England governor, issued a stern warning: banks should not issue their own stablecoins. He said such moves could destabilize the financial system and drain money from traditional banking. He emphasized that stablecoins lack the guarantees of commercial bank deposits and could weaken credit creation (thetimes.co.uk).
Bailey urged banks to focus on tokenised deposits—digital versions of traditional money—rather than private stablecoins or central bank digital currencies. He finds tokenised deposits more compatible with existing financial infrastructure (thetimes.co.uk).
He also noted that stablecoins cannot stand in for commercial bank money. They don’t offer the same protections, making them a poor substitute (reuters.com).
As the new chair of the Financial Stability Board, Bailey plans to push for strict regulation. His goal is to shield the financial system from potential harm posed by stablecoins (thetimes.co.uk).
Clash with Prior BOE Warnings
The BOE stablecoin stance clashes sharply with earlier comments. In the past, the bank supported innovation in digital money. Now it echoes warnings from the 2023 discussion paper. That report highlighted risks from systemic payment systems using stablecoins (bankofengland.co.uk).
A Shift in Tone
In 2021, the BOE urged public debate on digital currencies. The paper said stablecoins might threaten its monetary tools.
By April 2025, the BOE’s Financial Policy Committee warned that poor oversight and weak reserves could trigger financial instability (cryptoslate.com). Just months later, Bailey’s comments mark a clear intensification of concern. He now rejects banks issuing stablecoins outright (thetimes.co.uk).
This progression reveals a regulatory evolution. From cautious engagement to outright opposition. The BOE stablecoin stance clashes not just with private sector ambitions. It also defies the bank’s own earlier openness to tokenized money.
Why the BOE Is Taking This Stance
The BOE stablecoin stance clashes with prior optimism for crucial reasons. Andrew Bailey’s warnings highlight clear risks:
Draining Bank Lending
Bailey emphasized that stablecoins could siphon deposits from banks. This weakens credit creation. As he notes, “If stablecoins take money out of the banking system, banks have less capacity to lend” (bravenewcoin.com). With fewer deposits, banks can’t support loans for homes or businesses.
Threat to Monetary Control
Stablecoins can blur the line between commercial bank money and central bank money. The BIS also warned that widespread stablecoins could undermine monetary sovereignty (reuters.com). Bailey echoed this, calling stablecoins a threat to governments’ control over currency.
Risk of Fire Sales
During a run, stablecoin issuers holding illiquid reserves may sell in bulk, disrupting bond markets. The BOE flagged concerns about asset “fire sales” undermining financial stability (ledgerinsights.com).
Operational & Crime Risks
Bailey raised concerns about money laundering and cybersecurity tied to stablecoins (beincrypto.com). Risks like these worry regulators and could expose users.
Global Coordination and Strong Regulation
Now in charge of the Financial Stability Board, Bailey plans to pursue global regulation (fsb.org, thetimes.co.uk). He wants a consistent framework to prevent stablecoins from threatening financial integrity.
In summary, the BOE stablecoin stance addresses practical threats—reduced lending, weakened monetary control, liquidity shocks, and crime. These concerns shape their clear preference for tokenised deposits, not private stablecoins. Here’s a look at how tokenised deposits compare with private stablecoins:
Tokenised deposits stay within the banking system. They support lending and preserve liquidity. They also offer regulatory oversight, aligning with the BOE’s goals.
Comparative Regulatory Landscape
The BOE stablecoin stance stands out sharply when compared to the U.S. and EU.
United States
U.S. regulators currently embrace stablecoins. The Senate passed the GENIUS Act on June 17, 2025, creating a framework for payment stablecoins. It sets clear rules for liquidity, auditing, and issuer thresholds (thetimes.co.uk, reuters.com).
The House is considering a companion bill, the STABLE Act. It would work alongside GENIUS to form a federal-state hybrid system.
Banks like JPMorgan and Bank of America are proceeding with stablecoin projects. These moves reflect a supportive regulatory environment (reuters.com).
European Union
The EU implemented the Markets in Crypto‑Assets (MiCA) regulation in December 2024. It demands reserve transparency, risk controls, and licensing for significant stablecoin issuers (en.wikipedia.org).
MiCA’s strong standards promote trust. They still allow for private stablecoin issuance under EU oversight. This contrasts with the BOE’s more cautious tone.
UK vs Global
The BOE stablecoin stance remains stricter than both the U.S. and EU. While global powers regulate private stablecoins, the BOE continues pushing tokenised deposits.
Stablecoin issuers targeting cross-border markets face a fragmented landscape. The U.S. encourages innovation under clear rules, Europe regulates transparently, and the UK remains wary.
Implications for Stablecoin Issuers
The Bank of England’s recent warning against banks issuing their own stablecoins carries significant implications for issuers and the broader digital asset ecosystem.
Regulatory Uncertainty
The Bank of England’s stance introduces a layer of regulatory uncertainty for stablecoin issuers. While the U.S. and EU are moving towards clearer frameworks, the UK’s cautious approach may lead to a fragmented regulatory environment. Issuers may face challenges in navigating these differing regulations, potentially impacting their operations and market strategies.
Market Confidence and Adoption
The Bank’s warning could affect market confidence in stablecoins. If key financial institutions and regulators express skepticism, it may deter adoption among users and businesses. This could slow the growth of the stablecoin market and limit its potential use cases.
Innovation and Technological Development
The emphasis on tokenized deposits over stablecoins may shift the focus of technological development. Issuers may need to adapt their platforms to align with the Bank’s preferred model, potentially diverting resources from other innovative projects. This could impact the pace of technological advancement in the digital asset space.
Global Competitive Positioning
The divergence in regulatory approaches between the UK and other regions like the U.S. and EU could affect the global competitiveness of UK-based stablecoin issuers. Companies may consider relocating to jurisdictions with more favorable regulatory environments, potentially leading to a brain drain and loss of innovation within the UK.
Adapting to the New Regulatory Landscape
The Bank of England’s recent warning against banks issuing their own stablecoins marks a significant shift in the UK’s approach to digital currencies. For stablecoin issuers, this development necessitates a strategic reassessment to navigate the evolving regulatory environment (cointribune.com).
Understanding the Regulatory Shift
Governor Andrew Bailey’s caution reflects a broader concern about financial stability and the potential risks posed by privately issued stablecoins. His preference for tokenized deposits over stablecoins indicates a move towards integrating digital currencies within the existing banking infrastructure, ensuring better alignment with traditional financial systems.
Strategic Considerations for Issuers
Engage with Regulators: Proactively engage with UK regulators to understand the implications of the Bank’s stance and to participate in the development of future regulatory frameworks.
Evaluate Tokenized Deposit Models: Explore the feasibility of offering tokenized deposits, which may align more closely with regulatory expectations and provide a pathway for innovation within the confines of existing regulations.
Monitor Global Regulatory Trends: Stay informed about developments in other jurisdictions, such as the U.S. and EU, to anticipate potential impacts on cross-border operations and to identify opportunities for alignment or differentiation.
Enhance Transparency and Compliance: Strengthen internal compliance measures and transparency practices to build trust with regulators and stakeholders, demonstrating a commitment to financial stability and regulatory adherence.
Long-Term Outlook
While the Bank of England’s current position presents challenges, it also underscores the importance of regulatory clarity in fostering a stable financial ecosystem. By adapting to these regulatory shifts, stablecoin issuers can contribute to the development of a secure and efficient digital currency landscape in the UK.
Key Takeaways for Stablecoin Issuers Navigating a Fragmented Global Landscape
The Bank of England’s recent warning against banks issuing their own stablecoins marks a pivotal moment in the UK’s approach to digital currencies. Governor Andrew Bailey’s concerns highlight the potential risks that private stablecoins pose to financial stability, credit creation, and the integrity of monetary systems (crowdfundinsider.com).
While the U.S. and EU are advancing with their respective stablecoin frameworks, the UK’s cautious stance emphasizes the need for regulatory clarity and alignment with traditional banking systems (cointribune.com).
For stablecoin issuers, this regulatory divergence underscores the importance of adapting to local regulations and considering alternative models, such as tokenized deposits, that align with the Bank of England’s preferences (ledgerinsights.com).
As the global landscape of digital currencies continues to evolve, staying informed and agile will be crucial for navigating the complexities of international regulations and ensuring the stability and success of digital financial innovations.
