Bank of England Warns Stablecoin Growth Could Threaten Financial Stability
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Bank of England Deputy Governor Sarah Breeden warned that rapid stablecoin growth could drain traditional bank deposits and destabilize banks’ ability to fund lending, posing a material financial stability risk to the crypto ecosystem. Regulators have softened earlier rules — originally requiring 40% reserves at the central bank earning zero interest — to permit 60% backing in UK government debt that yields returns, a change that reshapes stablecoin security, issuer economics and crypto adoption including DeFi market dynamics.
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- BoE warns rapid stablecoin growth risks destabilizing traditional bank deposits.
- Original rules required 40% reserves at the central bank earning zero interest.
- Revised plans allow 60% in UK government debt with returns on backing assets.
The Bank of England’s Deputy Governor Sarah Breeden made clear this week that rapid stablecoin growth poses a genuine risk to financial stability, even as the central bank softens some of its most restrictive proposed rules following industry pressure.
The risk Breeden identified is important. If consumers and businesses shift large amounts of money from bank accounts into stablecoins quickly, it could destabilize banks that rely on those deposits to fund lending.
“It is money and we want to make sure that this new form of money is safe,” Breeden said during a visit to Bristol.
Why the Original Rules Were So Strict
The Ba…
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