Stablecoin dollar spillovers could leave the UK more exposed to global financial conditions and reduce the reach of domestic monetary policy, according to a Bank of England paper published on October 16, 2026.
What the stablecoin dollar spillovers model finds
Monetary Policy Committee member Catherine Mann and Bank staff built a UK-U.S.-euro-area model using daily financial data from September 1999 through December 2025. They concluded that the UK is largely a taker of global financial conditions, both from the United States and from its largest trading partner, the euro area.
| Indicator | Peak response | Timing |
|---|---|---|
| Global credit spread | −15 basis points | Shock definition |
| UK real GDP | +0.3% | 4 quarters |
| UK CPI | +0.3% | 7 quarters |
| Bank Rate | +34 basis points | 6 quarters |
Source: Fusion Market News chart using estimates reported in the Bank of England discussion paper. Values are peak modeled responses, not forecasts.
The paper separates its publication date from the underlying event: Mann presented the work at the Federal Reserve Bank of Kansas City’s Jackson Hole symposium held August 27–29, 2026. The Bank of England posted the full discussion paper on October 16.
Why stablecoins matter for policy transmission
The authors identify three channels. Moving funds from bank deposits into unremunerated stablecoins could weaken the banking system’s role in passing Bank Rate changes to the broader economy. Wider use of dollar-denominated tokens could also increase exposure to U.S. monetary policy, investor confidence and currency mismatches.
Finally, large and fast-moving stablecoin transactions could amplify volatility in wholesale bank funding and gilt markets. The paper does not say these outcomes are certain; it argues that financial innovation can alter the channels through which international shocks reach a small open economy.
What markets should watch next
The key question is whether stablecoin adoption becomes large enough to change deposits, funding markets and currency denomination. The Bank’s figures come from modeled shocks rather than a forecast, so actual effects will depend on regulation, reserve design, user behavior and the scale of adoption.
Related Fusion Market News coverage includes how deposit rates affect stablecoin growth, offshore dollar demand and emerging-market currencies and the changing safe-haven role of government bonds.
Image credit: Colin Watts/Unsplash.
Sharron Kendi
Sharron Kendi is a seasoned crypto market analyst and writer with over three years of experience decoding blockchain trends, price movements, and market dynamics. She holds a Bachelor’s Degree in Commerce (Finance) from Kenyatta University, blending a solid academic foundation with a sharp eye for technical analysis and a deep understanding of on-chain data. Her work delivers clear, data-driven insights that empower investors to navigate the fast-evolving digital asset space with confidence.
