The debate surrounding private stablecoins has taken center stage in the UK, with Bank of England Governor Andrew Bailey issuing a strong warning to financial institutions. During a recent statement, Bailey raised concerns over the potential systemic risks that privately issued stablecoins could pose to monetary policy, financial stability, and consumer protection.
The remarks come as global regulators, including those in the UK, intensify their scrutiny of stablecoins amid the growing adoption of digital assets. The Governor’s message reflects a broader regulatory momentum across Europe and other jurisdictions to distinguish between central bank digital currencies (CBDCs) and stablecoins created by private entities.
Private Stablecoins Seen as Threat to Financial Sovereignty
Bailey argued that while innovation in digital finance is welcome, private stablecoins must not replace public money or undermine the role of traditional banking systems. The concern is that large-scale adoption of privately issued stablecoins—such as USDT, USDC, or emerging corporate-backed tokens—could circumvent central bank authority and lead to “unregulated shadow banking.”
In particular, Bailey stressed that privately issued tokens backed by illiquid or risky assets could fail to meet redemption promises during periods of market stress. “There’s a real concern that if these instruments become widely used for payments or savings, they could disrupt monetary policy transmission or pose solvency risks,” he said, echoing sentiment shared in a recent Times interview.
Stablecoin Market Booms Despite Warnings
Despite regulatory concerns, the stablecoin market continues to grow. According to data from RWA.xyz, the total market capitalization of stablecoins currently exceeds $160 billion, with Tether (USDT) and Circle’s USD Coin (USDC) dominating over 90% of the volume.
Source : RWA.xyz
This rise has encouraged several fintech firms and neobanks to explore launching their own asset-backed tokens—precisely the trend the Bank of England is aiming to curb.
The RWA data also shows that only a small percentage of stablecoins are fully transparent about their collateral composition or redemption policies, further fueling central bank skepticism.
Global Trend Toward Regulatory Clarity
The UK’s stance aligns with the broader direction taken by financial watchdogs like the European Central Bank and the U.S. Federal Reserve, which have both emphasized that private stablecoins must be subject to banking-level regulatory frameworks. Many experts believe that while the technology behind stablecoins can improve payment efficiency, oversight must catch up before these instruments can be safely adopted at scale.
This position may ultimately influence the upcoming Financial Services and Markets Bill updates in the UK, where stablecoin classifications and issuer obligations are expected to be outlined in more detail.
Will CBDCs Be the Official Answer?
While discouraging the rise of private stablecoins, the Bank of England has been accelerating its own digital pound research. The so-called “Britcoin” project aims to create a government-backed digital currency that combines the benefits of stablecoins with the trust and backing of the central bank. Bailey emphasized that public money must remain the anchor of the financial system—even in a digital age.
His comments serve not just as a warning to startups and exchanges but also as a signal that the digital currency space in the UK will likely become more tightly regulated in the months ahead.
Final Thoughts: What the Bank of England Crackdown Means for Private Stablecoins
The message from the Bank of England is clear: private stablecoins must operate within strict regulatory boundaries—or risk being shut out of the mainstream financial system. As demand for digital money accelerates, the battle between centralized CBDCs and decentralized or corporate-issued tokens is becoming more pronounced.
For now, Bailey’s warning is a wake-up call for projects planning to issue their own stablecoins in the UK. Whether this slows innovation or redirects it toward compliant models remains to be seen.
