BoE Warns Stablecoin Growth Could Threaten Financial Stability
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 Englands 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 Banks proposals were calibrated against real crisis data, not invented conservatism:A 40% mandatory deposit requirement at the central bank, earning zero interest, modeled on Silicon Valley Banks 2023 collapseIndividual ownership caps of £20,000 per stablecoin and £10 million for businessesNear-total restriction on interest-earning reserve assets “It was based on experience of potential liquidity stress. But we will look hard to see if we have been overly conservative in our