Citing the 2023 depegging of USDC following the collapse of Silicon Valley Bank, the Bank of England has designed its core stablecoin regulation to prevent a modern-day digital run on the bank.
The central bank’s long-awaited consultation paper warns that weak rules could lead to financial instability and a credit crunch.
At the heart of the proposal is a requirement for issuers of “systemic” stablecoins to hold 40% of their reserves in non-interest-bearing accounts at the BoE. Deputy Governor Sarah Breeden explicitly linked the measure to the Circle-SVB crisis, where $3.3 billion was frozen. “Those numbers are broadly in line with that,” she noted.
The framework, which also proposes holding limits to curb concentration risk, highlights the U.K.’s attempt to navigate a “different set of risks” than the US as it integrates stablecoins into its financial plumbing, carefully balancing innovation with the imperative of financial stability.
