The Bank of England is to insure stablecoins: Crypto assets are being integrated into traditional financial protection frameworks

The Deputy Governor of the Bank of England, Dave Ramsden, recently stated that the UK may need to establish a protection mechanism for stablecoins similar to bank deposits. This statement marks a shift from passive response to proactive design by regulators, reflecting a significant elevation in the status of stablecoins within the financial system. As the use of stablecoins expands, the Bank of England has begun considering how to maintain public confidence in the event of a systemic stablecoin collapse.

Specific Recommendations from the Central Bank

Ramsden proposed two core protective measures:

• Establish a deposit insurance-like scheme to provide safeguards for stablecoin holders
• Ensure stablecoin holders have priority creditor status in statutory settlement arrangements

The logic behind these measures is clear: if stablecoins have become a common payment tool for the public, their risks are no longer purely investment risks but systemic financial risks. From this perspective, the central bank’s attitude shift is reasonable.

Existing Protection Framework in the UK

The Bank of England has already been advancing the upgrade of deposit protection systems. According to the latest information, the protection limit for UK residents’ regular cash deposits has been raised from £85,000 to £120,000, an important measure to prevent bank failures.

If stablecoins are incorporated into a similar framework, it means:

What Does This Mean

The “Financialization” of Stablecoins

Previously, stablecoins were viewed as a type of crypto asset. Now, the Bank of England is beginning to see them as tools that need to be incorporated into traditional financial protection frameworks. This reflects that stablecoins have moved from the fringe to the mainstream.

Improvement of Regulatory Framework

The Bank of England plans to implement stablecoin regulatory rules by the end of 2026. This is not simply about banning or restricting but involves designing appropriate risk management mechanisms based on acknowledging the existence of stablecoins. This approach is more pragmatic than outright bans.

Recognition of Systemic Importance

Ramsden emphasized the concept of “systemically important stablecoins.” The central bank is assessing which stablecoins pose systemic risks to the financial system and require corresponding protection and regulation. This indicates that the scale of stablecoin usage has attracted the central bank’s attention.

Global Demonstration Effect

As a global financial hub, the UK’s stance on stablecoins often sets an example. Unlike other countries that adopt aggressive regulation or outright bans, the UK has chosen a more moderate and integrated approach: recognizing the financial attributes of stablecoins but incorporating them into existing regulatory frameworks. This approach could serve as a reference for other developed nations.

Summary

The remarks by the Deputy Governor of the Bank of England reflect an important shift: stablecoins are gradually moving from the realm of crypto assets into the traditional financial system. The central bank is no longer passively responding to stablecoin risks but proactively designing protective mechanisms. This not only acknowledges the current status of stablecoins but also demonstrates the central bank’s cautious attitude toward systemic financial risks. With the UK planning to implement stablecoin regulatory rules by the end of the year, we may see a relatively complete stablecoin regulatory framework emerge. This could be beneficial for the long-term development of stablecoins—standardization means higher acceptance and a larger market space.