Stablecoin market

Stablecoin Uncertainty Increases as Banks Disband and Regulators Face Pressure

ByMolly McNearney

The UK shouldn’t put off what may be the next financial revolution.

Private stablecoins continue to divide banks globally, resulting in unclear regulatory frameworks. While some financial organizations question the need for stablecoins and warn of risks to the banking system, others view them as promoters for innovation. Regulators are being pressured to take immediate action as the debate heats up.

stablecoin face trouble

Bank of England Governor Andrew Bailey has explicitly warned against banks issuing their stablecoins, citing risks to financial stability and credit creation. Instead, he favors tokenized deposits—digital versions of bank deposits secured within the banking system.

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Outlook for the UK

  • Andrew Bailey, the Governor of the Bank of England, has specifically recommended against banks issuing their stablecoins, citing the consequences for credit creation and financial stability. He supports tokenized deposits, which are digital representations of bank deposits that are protected by the financial system. (CCN.com)
  • In order to prevent systemic risks, Standard Chartered and other banking executives have advocated for bank-style regulatory frameworks, contending that stablecoins need to be subject to the same scrutiny as conventional payments. (thebanker.com)

The United States’ viewpoint

Future of Stablecoin
  • The opinions of large U.S. institutions, including JPMorgan, Citigroup, and Goldman Sachs, regarding stablecoin infrastructure are still divided. While some believe there are compelling applications in international banking and payments, others wonder if stablecoins will become a threat to established businesses. (marketwatch.com)
  • Passage of the GENIUS Act in July 2025 establishes formal rules for issuers, reserve backing, licensing, and consumer protections, offering clarity but also igniting debate over central bank involvement and monetary sovereignty.

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Increasing Regulatory Pressure

  • The Financial Policy Committee (FPC) in the United Kingdom has identified issues with global stablecoins backed by weak assets, raising the possibility of currency substitution or refund failure, especially if U.S. dollar-pegged coins join the market. (cointelegraph.com)
  • Administrators in Europe have been pursuing the MiCA framework in the meantime, and the GENIUS Act in the US requires stablecoin issuers to have one-for-one asset backing, audit standards, and reserve disclosure.

In conclusion, regulators are unable to remain passive.

There is a greater need than ever for regulatory clarification since banks are still divided, with cautious skepticism in the UK and cautious experimentation in the US.Lack of logical frameworks might jeopardize financial stability and impede innovation.A balance between safeguarding the public and allowing the tokenized economy to develop must be struck by regulators.

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