Fed and BoE split on stablecoins

TLDR

A public exchange between senior Fed and BoE officials shows sharply different expectations for the future of stablecoins.

1. Bank of England policymaker Megan Greene argues stablecoin demand may fade and be replaced by bank-issued tokenised deposits within about five years.
2. Federal Reserve Governor Christopher Waller defends stablecoins as a useful payment innovation that increases competition and could extend the reach of US monetary policy.
3. For crypto users and issuers, this split signals diverging US and UK policy paths and a likely push toward stricter oversight, bank-backed tokens, and clearer rules for dollar stablecoins.

Deep Dive

1. What Each Side Actually Said

At a conference in Dubrovnik, Bank of England Monetary Policy Committee member Megan Greene said stablecoin popularity "could soon fade," predicting that tokenised deposits - digital versions of commercial bank deposits - are likely to win out over the next five years. She argued that while there is room for central bank digital currencies (CBDCs), stablecoins and digital deposits, tokenised deposits will probably dominate once banks realize they risk losing fee income and deposits if they do nothing, and then invest in their own digital offerings.Greene also highlighted concerns that stablecoins are not always stable, face regulatory gaps, and can be used for illicit finance.

On the same panel, Federal Reserve Governor Christopher Waller took the opposite view, describing stablecoins as a normal payment instrument that should not be "squashed" by over-regulation. He said there is "nothing evil" or uniquely dangerous about them and pointed out that banks are lobbying hard against stablecoins precisely because they see them as competitive threats in cross-border payments.He also said stablecoins are scaring banks by offering cheaper, faster international transfers.

2. Why It Matters For Stablecoin Users

Greene worries that stablecoins drain deposits from commercial banks, which could weaken the transmission of monetary policy and increase financial stability risks. That is why she favors models where either the central bank (via a CBDC) or regulated banks (via tokenised deposits) remain at the center of digital money. If this view shapes the BoE and UK regulators, expect a regime that heavily favors bank-issued tokens and tight controls on independent stablecoins.

Waller, by contrast, sees stablecoins as something that can strengthen the dollar. He has previously argued that dollar-backed stablecoins could broaden the reach of US monetary policy abroad, similar to fixed exchange rate regimes, provided there is a clear regulatory framework.In another speech, he questioned the need for CBDCs while being more open to private stablecoins under rules.

3. What To Watch Next

1. UK regime design. The UK is already working on stablecoin and digital money regulation. Greene's comments suggest the BoE may push for frameworks that privilege tokenised deposits and keep non-bank stablecoins tightly constrained.
2. US legislation and rulemaking. In the US, bills like the CLARITY Act and potential FDIC or Treasury rules for stablecoin issuers are lining up toward clearer national standards, which could benefit compliant dollar stablecoins but raise costs for issuers.
3. Bank adoption of tokenised deposits. If major banks actually ship widely used tokenised deposit products, Greene's "rhino" thesis becomes real competition for USDT, USDC and similar tokens, especially in regulated payment use cases.

Conclusion

The Fed-BoE split on stablecoins is less about whether digital money survives and more about who controls it and how risks are managed. In practice, it points toward a future where private dollar stablecoins, CBDCs and bank-issued tokenised deposits coexist, but the balance between them will be set by regulation. Watching how US lawmakers, UK authorities and large banks respond will be key to understanding where stablecoin liquidity and innovation concentrate over the next few years.