Bank of England Proposes Strict Capital Buffers to Stave Off Stablecoin-Induced Bank Run

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The Bank of England has proposed that stablecoin issuers must park nearly half of their reserves at the central bank. Officials caution that without these robust safeguards, the financial system could face a damaging credit crunch.

The newly unveiled framework includes a 40% reserve requirement held in non-interest-bearing accounts at the BoE, a measure designed to prevent a rapid exodus of deposits from banks to stablecoins from destabilizing the lending market.

“We have to manage these risks carefully as we bring in this new form of money,” said Deputy Governor Sarah Breeden, pointing to the 2023 crisis involving USDC and Silicon Valley Bank as a clear precedent. The proposal also sets holding caps of £20,000 for retail users and £10 million for firms to limit systemic exposure.