Bailey warns US stablecoin rules could prompt runs

Bank of England Governor Andrew Bailey warned Friday at a Bank of England conference on financial imbalances that international regulators face a coming clash with the U.S. over stablecoin standards. Bailey also chairs the Financial Stability Board.

Bailey highlighted that some dollar-linked tokens cannot be redeemed directly with the issuer and instead require routing through crypto exchanges. He cautioned that in a stress event investors could move from tokens with weak redemption guarantees into jurisdictions with stricter convertibility rules.

“If we want stablecoins to be part of the architecture of payments globally … they're only going to work if we have international standards,” Bailey said, adding the outcome of a run would be concentrated pressure on jurisdictions with stronger protections. “We know what would happen if there was a run on a stablecoin — they'd all turn up here.”

U.S. policy has taken a different direction. President Trump signed the GENIUS Act into law in July 2025, a law that requires 100% reserve backing for certain stablecoins and monthly disclosures. The FDIC proposed implementing rules in April, and the Senate Banking Committee is preparing to mark up the broader CLARITY Act after lawmakers reached a bipartisan agreement on allowable yields for stablecoin reserves. Bailey pointed out the GENIUS Act does not require issuers to offer direct redemption of tokens without intermediaries.

The U.K. has been advancing its own framework. In November the Bank of England opened a consultation on rules for “systemic” sterling stablecoins, proposing holding limits of £20,000 for individuals and £10 million for businesses. The draft would require systemic issuers to keep at least 40% of reserves in unremunerated accounts at the Bank of England and the remainder in short-term UK government debt to support rapid redemptions. After industry pushback, the BoE said it would consider revising the caps and expected updated draft rules around June. Six major UK banks have launched a live pilot of tokenized sterling deposits.

European central bankers have expressed related concerns. European Central Bank President Christine Lagarde warned that euro-denominated stablecoins could threaten financial stability and interfere with monetary-policy transmission.

The Financial Stability Board has issued stablecoin recommendations since 2020, but those guidelines are non-binding. Bailey urged coordinated global standards and questioned whether the FSB process can produce rules that U.S. authorities would accept, noting differences in reserve rules and redemption mechanics between jurisdictions.

Bailey said regulatory divergence could have operational consequences: if dollar-pegged tokens that lack direct convertibility gain prominence in cross-border payments, market stress might trigger rapid flows toward tokens backed by jurisdictions with enforced redemption mechanics, placing strains on those systems.