The development of global standards for stablecoins has decelerated over the past year, sparking concerns among central bankers that regulatory gaps could lead to market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, noted that progress on international rules has stalled. This slowdown is a concern, according to Bank for International Settlements General Manager Pablo Hernández de Cos, who emphasized the importance of global cooperation to prevent a patchwork of rules that companies could exploit.
Without international alignment, firms may engage in regulatory arbitrage by shifting operations to jurisdictions with less stringent oversight. Major economies are moving forward with their own frameworks, often with different timelines and approaches, which could exacerbate the issue.
The stablecoin sector has grown significantly over the past few years, now accounting for $320 billion, with Tether's USDT and Circle Internet's USDC making up the majority of this figure. De Cos pointed out that the structure of stablecoins can resemble securities more than cash, and redemption frictions can cause prices to deviate from their intended $1 value.
He also warned that sudden withdrawals could have a ripple effect on markets. To mitigate these risks, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities or deposit-insurance-type arrangements. Policymakers believe these measures could make the sector safer while preserving its role in digital payments.
In the United States, lawmakers are working to advance the Digital Asset Market Clarity Act, which would establish federal rules for digital asset markets. The bill has passed the House and is currently before the Senate, where lawmakers are leading the push for its passage. A deal remains contingent on resolving several open questions, including DeFi oversight and ethics provisions.