Circle Internet Corp. (CRCL), the company behind the USDC stablecoin, saw its stock price plummet by 5.04% in Tuesday's trading session. The sharp decline comes amid growing concerns over potential regulatory challenges in the stablecoin market, particularly following warnings from the Bank of England.

Bank of England Deputy Governor Sarah Breeden cautioned against further diluting rules for stablecoins, stating that such actions could endanger financial stability and potentially cause a credit crunch. Breeden emphasized that the UK needs to take a different approach to stablecoins compared to the United States, given the distinct risks in the British financial system.

The Bank of England recently proposed new rules for systemic stablecoins, including a 20,000-pound ($26,840) holding limit per person and requiring issuers to hold 40% of backing assets with the central bank. Breeden defended these measures, citing past stress events such as the 2023 collapse of Silicon Valley Bank and when Circle's USDC stablecoin temporarily lost its dollar peg.

This regulatory stance could have significant implications for Circle and other stablecoin issuers operating in the UK market. As one of the largest stablecoin providers globally, any tightening of regulations could impact Circle's operations and growth prospects, potentially explaining investors' negative reaction. The company may face challenges in adapting to stricter rules, which could affect its market share and profitability in key markets like the UK.