Bailey Warns U.S. Stablecoin Rules Could Shift Risk to U.K.

Bank of England Governor Andrew Bailey warned at a conference on financial imbalances that a policy gap between U.S. and U.K. stablecoin rules could shift redemption pressure to Britain during a crisis. He said dollar-pegged tokens that do not offer direct 1:1 redemption could “flood” the U.K. if investors sought jurisdictions with firmer convertibility.

Bailey, who also chairs an international financial stability body, urged international standards for stablecoins if they are to operate across borders. “Frankly, that, I think, is going to be a coming wrestle with the U.S. administration,” he said, adding that in a run on a stablecoin “they’d all turn up here.”

U.S. proposals would let issuers route redemptions through exchanges and extend the redemption window to seven days during stress. U.K. rules require continuous 1:1 redemption backed by deposits accessible at the central bank, a design meant to ensure immediate convertibility for payment use.

The mismatch in rules raises the question of where redemption demand would land in a shock. Christian Walker, chairman of the Stablecoin Standard, argued that a global consensus will emerge over time and that international guidance can shape which approaches gain traction. He said the body Bailey chairs helps set a baseline that many jurisdictions tend to follow.

Some market participants downplayed the immediate convertibility risk. Ran Hammer, chief business officer at Orbs, pointed to long-standing dollar-denominated markets that operate offshore without direct central bank redemption lines and emphasized reserve quality and transparency as the main issues.

Other experts cautioned that U.S. rules could externalize stress. Jamie Green, chief operating officer at Superset, warned the U.K. might absorb redemptions if holders seek stronger convertibility guarantees. Rohit Sahblok of GRT Consulting described U.S. proposals as more friendly to innovation, while framing the U.K. approach as designed for a payment system that must remain 1:1 at all times.

Market access gives national regulators practical leverage over foreign stablecoins. James Brownlee, chief executive of a firm behind a Tether-backed stablecoin, said the U.K. can exclude non-compliant tokens from regulated payment rails, an outcome that could affect British businesses’ access to some global payment networks.

U.S. policymakers are pursuing legislation quickly. The administration has targeted July 4 for House passage of the Digital Asset Market Clarity Act and set a timeline that calls for a Senate committee markup this month followed by a Senate floor vote in June. Patrick Witt, executive director of the President’s Council of Advisors for Digital Assets, described the July 4 milestone as a policy objective.

Central bankers in Europe have voiced parallel concerns. European Central Bank President Christine Lagarde warned that euro-denominated stablecoins may present structural weaknesses for monetary policy transmission and are not an efficient route to strengthen the euro’s international role.

Regulators and market participants say the outcome of the rule differences will be decided by a mix of international guidance, national law and market behavior. The debate centers on whether stablecoins used for payments must hold central bank-accessible reserves for immediate redemption, or whether supervised alternative redemption mechanisms through exchanges and custodians are acceptable. The rules will determine which tokens can use regulated payment infrastructure in each country.