The Bank of England’s Financial Policy Committee (FPC) is raising red flags over the rapid expansion of stablecoins, warning that these digital assets could pose systemic risks if left unchecked.
In a summary of meetings held earlier this month, the committee emphasized that as activity around stablecoins increases, so do the potential threats to financial stability—especially if these tokens are poorly backed or improperly managed.
One concern highlighted by the committee involves offshore stablecoins tied to the British pound. If the underlying assets supporting these tokens are mismanaged or lack resilience, a sudden wave of redemptions could trigger fire sales, creating shockwaves across key UK financial markets.
The FPC also pointed to the growing use of stablecoins tied to foreign currencies as a looming challenge. Even with future regulation in place, a widespread shift toward non-sterling digital money could lead to unintended consequences, including partial currency substitution and pressure on macroeconomic policy tools.
Looking ahead, the committee noted that stablecoins could begin playing a larger role in both retail and institutional cross-border payments. For households and small businesses, they may offer a cheaper and faster alternative for international transfers. But for the broader financial system, this shift could increase credit risks and weaken the central bank’s ability to manage liquidity in times of market stress.
As global regulators race to set rules for the sector, UK officials are making it clear: the stablecoin boom must be met with caution—and strong oversight.
Alexander Stefanov
Reporter at Coindoo
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over 8 years of experience covering the crypto, blockchain and fintech industries, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics.
Source: https://coindoo.com/bank-of-england-flags-growing-stablecoin-risks-in-uk-financial-system/