The development of global stablecoin standards has slowed down over the past year, sparking concerns among central bankers about potential market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, noted that progress on international regulations has come to a standstill, as reported by Reuters. This has raised concerns for 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. De Cos warned that without international alignment, firms may relocate to jurisdictions with more lenient oversight, a practice known as regulatory arbitrage.
Major economies are pushing forward with their own frameworks, often with different approaches and timelines. 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 issues can cause prices to deviate from their intended value of $1. He also highlighted the risk of sudden withdrawals having a ripple effect on markets. To reduce 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 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 passed the House last year and is currently before the Senate, where Banking Committee Chairman Tim Scott and Agriculture Committee Chairman John Boozman are leading the effort. A deal is contingent on resolving several open questions, including DeFi oversight and ethics provisions.