The development of global standards for stablecoins has slowed down over the past year, prompting concerns among central bankers that inadequate oversight 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, according to Reuters.
Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos expressed concerns about the slowdown, emphasizing the importance of global cooperation to avoid a patchwork of regulations that companies could exploit. Without international alignment, firms may shift their operations to jurisdictions with less stringent oversight, a practice known as regulatory arbitrage.
Major economies are pushing ahead with their own frameworks, often with different timelines and approaches. The stablecoin sector has grown significantly over the past few years, with a current value of $320 billion, according to DeFiLlama, with Tether's USDT and Circle Internet's USDC making up the majority of this figure. De Cos noted that the structure of stablecoins can resemble securities more than cash, and that redemption frictions can cause prices to deviate from their intended value of $1. He also warned that sudden withdrawals could have a ripple effect on markets.
To reduce risks, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities or deposit-insurance-type arrangements. Policymakers argue that such measures could make the sector safer while preserving its role in digital payments.
In the US, 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 to resolve open questions, including DeFi oversight and ethics provisions, to pave the way for a markup.