Bank of England Deputy Governor warns "Loosening stablecoin regulation threatens financial stability"

The Bank of England (Bank of England·BOE) has warned that its proposed stablecoin regulations could damage financial stability if they are loosened too much. Bank of England Deputy Governor Sarah Breeden said in a recent Reuters interview, "In bringing a new form of money into the regulated system, we have to manage another type of risk."

According to a Cointelegraph report on the 12th (local time), Breeden emphasized, despite industry criticism of the Bank of England's draft stablecoin regulations released the previous day, "If regulation is weakened, there is a risk that bank deposits will flow into stablecoins and the credit creation function will be constrained."

The most controversial part of the draft is the holding limits for individuals and companies. The Bank of England limited individuals to £10,000 (about 26.3 million won) and companies to up to £10,000,000 (about 13.1 billion won). Deputy Governor Breeden said, "This measure will reduce the stress on the banking system and credit supply to half," and "We will watch market reactions to see when to relax it."

The stablecoin market had grown to $312 billion by 2025, and major countries are preparing similar frameworks following the 'GENIUS bill' signed earlier this year by U.S. President Donald Trump. The UK also agreed to strengthen policy coordination on stablecoins through a September meeting between Treasury Minister Rachel Reeves and U.S. Treasury Secretary Scott Bessent.

Breeden also cited the March 2023 'Circle (USDC) depegging incident' as the basis for the issuer regulation. At that time, Circle's dollar-linked value temporarily collapsed due to the bankruptcy of Silicon Valley Bank (SVB), which held $3.3 billion in deposits. She said, "This incident proved the need for the regulation that requires stablecoin issuers to deposit 40% of assets with the Bank of England interest-free."

The Bank of England plans to finalize the regulatory proposal next year and plans to separate roles so that stablecoins used for everyday payments are directly supervised by the central bank, while stablecoins for crypto asset trading are handled by the Financial Conduct Authority (FCA).

Meanwhile, The Block reported that major UK stablecoin firms BVNK and Coinbase officially suspended $2 billion acquisition talks that day. If the deal had gone through, it was assessed that the spread of stablecoins in the UK would have accelerated.