The development of global standards for stablecoins has experienced a slowdown over the past year, sparking 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. This has raised concerns with 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, leading to regulatory arbitrage. Major economies are moving forward with their own frameworks, often with different approaches and timelines.
The stablecoin sector has grown significantly, now valued at $320 billion, with Tether's USDT and Circle Internet's USDC making up the majority. De Cos pointed out that the structure of these stablecoins can resemble securities more than cash, and that redemption issues can cause prices to deviate from their intended value. He also warned that sudden withdrawals could have a ripple effect through markets. To reduce risk, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities.
Policymakers believe such measures could enhance the safety of the sector 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 is currently before the Senate, with lawmakers negotiating a compromise on stablecoin yield and a potential hearing scheduled for the second half of April.