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. De Cos emphasized the importance of global coordination to prevent a patchwork of regulations that companies could exploit, potentially leading to regulatory arbitrage.
Major economies are moving forward with their own frameworks, often with different timelines and approaches. The stablecoin sector has grown significantly, now valued at $320 billion, with Tether's USDT and Circle Internet's USDC being the dominant players.
De Cos pointed out that the structure of stablecoins can resemble securities more than traditional currency, and redemption issues can cause prices to deviate from their intended value. 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. Policymakers believe these 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 aims to establish federal rules for digital asset markets. The bill has passed the House and is currently before the Senate. A deal is contingent on resolving open questions, including DeFi oversight and ethics provisions.