The head of the Bank of England, Andrew Bailey, has officially warned of an inevitable regulatory conflict with the United States over control of stablecoins. In a speech at a conference on financial imbalances, the official stated that the lack of common international standards poses a direct threat to global financial stability.
The main reason for the disagreement is the fundamentally opposite approaches to the convertibility of digital assets. Mr Bailey expressed concern that many dollar stablecoins promoted by the current US administration cannot be directly exchanged for fiat money without the involvement of cryptocurrency exchanges. In his opinion, this creates a hidden liquidity risk that could trigger a full blown run for stability during a market crisis.
Capital Flow Risks
The British regulator, who also chairs the Financial Stability Board, predicted a scenario in which assets from the United States would begin to flow en masse to the United Kingdom in the event of a panic. "We know what will happen if a run on a stablecoin starts, they will all end up here," Reuters quoted Bailey as saying. This magnet effect is explained by London's intention to introduce much stricter and more direct obligations to ensure the conversion of tokens into national currency on demand.
Two Approaches to Regulation
The split in approaches becomes evident against the backdrop of the US GENIUS Act, which enshrines the strategic role of stablecoins in strengthening the global dominance of the dollar and simplifies their reserve requirements. Unlike Washington, which bets on reserve backing with Treasury bonds and innovation, London focuses on protecting the payment system. Under draft British rules, systemic stablecoin issuers would be required to hold up to 40 per cent of their reserves directly in Bank of England accounts.
This situation presents digital asset issuers and investors with a dilemma of choosing between two jurisdictions. Experts believe that as long as Washington and London do not sit down at the negotiating table to develop a common standard, the stablecoin market with a volume of more than 317 billion dollars remains an area of heightened systemic risk.