Bailey described the tension as "a coming wrestle with the (U.S.) administration." "We know what would happen if there was a run on a stablecoin," he said. "They'd all turn up here." Bailey chairs the Financial Stability Board (FSB), the G20-mandated international body for coordinating financial regulation and monitoring the global financial system, which means his remarks carry weight well beyond the UK.

The Redemption Gap at the Center of the Dispute

The technical disagreement between London and Washington comes down to how stablecoin holders actually get their money back. A stablecoin is a crypto token pegged to a stable asset, typically the US dollar, and is used for payments and trading. Some US-issued stablecoins cannot be readily redeemed directly for dollars without routing through a crypto exchange. Instead, users must sell through a private crypto exchange to exit their position. The BoE views this as a structural liquidity risk: if confidence collapses, there is no guaranteed, direct route to cash.

The UK's own proposed framework, developed through a consultation process that closed on February 10, 2026, sets a different bar. The BoE requires same-day or real-time redemption at face value, on demand, with no undue restrictions. Issuers operating in the UK would need to hold at least 40% of their backing assets as deposits directly at the Bank of England, with up to 60% in short-term UK government debt. Temporary holding limits are set at £20,000 per individual and £10 million per business. Deputy Governor Sarah Breeden described the November 2025 consultation launch in these terms: "Today's proposals mark a pivotal step towards implementing the UK's stablecoin regime next year."

The GENIUS Act and the Dollar's Expanding Footprint

The US passed the GENIUS Act in July 2025, creating a domestic licensing framework for stablecoin issuers. The law requires 1:1 reserves backed by Treasury bills, physical currency, or short-term repurchase agreements. It also includes provisions for foreign issuers to access US markets under "comparable" foreign regulation, with bilateral negotiations still pending.

Critics, including Bailey, argue the law does not resolve the international convertibility problem. Dollar-backed stablecoins already account for more than 98% of the total stablecoin market cap, a concentration that exceeds the dollar's share in traditional finance. Critics have used the term "digital dollarization" to describe this dynamic, arguing that private stablecoin infrastructure is extending dollar dominance into payment systems globally, often without the oversight applied to traditional banking. The IMF flagged in September 2025 that stablecoins risk accelerating dollarization in emerging markets. Bailey's position is straightforward: "If we want stablecoins to be part of the architecture of payments globally, they are only going to work if we have international standards."

A $320 Billion Market With Uneven Rules

The total stablecoin market cap crossed $320 billion in April 2026. Tether (USDT) holds approximately $185.5 billion, representing 58% of the market. USD Coin (USDC) sits at roughly $78 billion. Daily on-chain stablecoin payment volume runs between $20 billion and $30 billion globally.

That scale makes the regulatory gap consequential for regions far outside London and Washington. In Africa, stablecoins are not speculative instruments. They are operational financial infrastructure. Africa records the highest stablecoin adoption rate globally at 9.3% of the population, and the continent moved more than $200 billion in on-chain stablecoin value between mid-2024 and mid-2025. Nigeria alone accounts for roughly 40% of Sub-Saharan Africa's stablecoin inflows. The country has 25.9 million crypto users and recorded approximately $22 billion in stablecoin transactions between 2023 and 2024, and its regulatory posture has shifted from an outright crypto ban to the domestic launch of the cNGN stablecoin. Kenya ranks fifth globally for transactional stablecoin use, with 34 million M-Pesa users increasingly interfacing with USDT-based rails; its Virtual Asset Service Providers Act came into force in October 2025. In Ethiopia, retail stablecoin transfers grew 180% year-over-year after a 30% currency devaluation, a pattern that mirrors the capital flight scenario Bailey is warning about. Traditional remittance fees in Africa average 7.9% for a $200 transfer. Stablecoin rails cut that cost sharply, meaning any regulatory fragmentation that raises compliance costs or restricts which tokens can cross borders would fall hardest on remittance-dependent households.

Compounding the regional stakes, most African jurisdictions lack central bank backstop mechanisms for stablecoin issuers. That absence makes internationally coordinated FSB standards arguably more consequential for low-income markets than for the UK itself, where deposit insurance and lender-of-last-resort facilities already exist.

South Asia faces similar dynamics. India ranks first in the 2026 Global Crypto Adoption Index, and inbound remittance flows to India from its diaspora, primarily in the UK and the US, total roughly $125 billion annually. Those flows benefit from near-zero stablecoin transfer costs compared with the 3.5% or more charged by traditional wire services. India's central bank has pushed back against foreign private stablecoins on two fronts. The Reserve Bank of India promotes the e-Rupee, a central bank digital currency (CBDC), as its sovereign-led alternative to private tokens. Separately, the Asset Reserve Certificate (ARC) is a proposed privately issued but sovereign-backed stablecoin pegged to Indian Government Securities. It is the ARC model, with its direct convertibility structure, that more closely mirrors the protections Bailey is demanding at the FSB level. Pakistan, which established a dedicated crypto council in March 2025 and is building a dedicated crypto regulator, PVARA, faces similar exposure through its diaspora remittance flows. The World Bank estimated that traditional US-Pakistan transfers cost over 3.5% as recently as late 2024, and the BoE's proposed £20,000 individual holding limit has drawn attention from fintech firms designing high-volume diaspora remittance corridors, as it constrains product architecture for regular, large-value transfers.

What Comes Next

The BoE is expected to publish its final Codes of Practice for stablecoin issuers later in 2026. Any FSB guidance on international interoperability standards will follow separately. For developers building payments infrastructure on stablecoin rails, and for fintech firms running remittance corridors through UK-regulated entities, the direction of those documents will determine which tokens remain viable in which markets. For now, the regulatory gap between London and Washington remains open. Bailey's own term for what follows is a "wrestle."