The Bank of England has fired an unusually blunt warning shot across the Atlantic: American stablecoins, turbocharged by the recently passed GENIUS Act, could destabilize British financial markets in ways London cannot yet control. Governor Andrew Bailey's remarks frame what may become the defining monetary policy tension of the next decade—not inflation or interest rates, but who writes the rules for programmable money.
Bailey's concern is specific and technical, which makes it more alarming than the usual central banker hand-wringing about crypto. Under the GENIUS Act, US-regulated stablecoins like USDC and Tether's USDT enjoy clearer redemption frameworks domestically, but those guarantees evaporate at the border. A British pension fund or corporate treasury holding dollar tokens during a liquidity crunch might find itself queuing behind American counterparties for actual dollars—or worse, holding an asset that British regulators cannot backstop.
The dollar's new Trojan horse
Stablecoins already process more transaction volume than Visa. The overwhelming majority are denominated in US dollars, effectively extending the greenback's reach into corners of global finance that traditional correspondent banking never touched. For the Bank of England, this is dollar hegemony by software update. Britain's own digital pound project remains years from launch, leaving a regulatory vacuum that American tokens are rushing to fill.
The asymmetry is stark. Washington has decided that stablecoins are a strategic asset worth legitimizing; London is still debating whether they are securities, e-money, or something else entirely. Bailey's "coming wrestle" language suggests Threadneedle Street knows it is entering the ring underweight.
What Britain can actually do
Options are limited and unpalatable. The UK could mandate that stablecoins operating domestically hold reserves with British institutions—a move that would likely push issuers to simply avoid the market. It could accelerate its own digital pound, though that project has moved at geological speed. Or it could negotiate a transatlantic compact on redemption rights, which would require Washington to care about British concerns more than it historically has on financial regulation.
The more probable outcome is a patchwork: tighter disclosure rules for UK-facing stablecoin promoters, enhanced liquidity buffers for domestic firms holding dollar tokens, and a lot of strongly worded speeches. None of which solves the core problem that in a crisis, dollars flow home.
Our take
Bailey is right to be nervous, but his warning arrives late. The GENIUS Act did not create dollar stablecoin dominance; it merely ratified a fait accompli. Britain's real failure was spending years treating crypto as a curiosity rather than a monetary policy challenge. The wrestle is coming, but London has already lost the first round by not showing up.
