The development of global standards for stablecoins has experienced a slowdown 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 has raised concerns for the General Manager of the Bank for International Settlements, Pablo Hernández de Cos, who emphasized the importance of global cooperation to prevent a patchwork of regulations that companies could exploit. Without international alignment, firms may relocate to jurisdictions with more lenient oversight, a practice known as regulatory arbitrage.
The stablecoin sector has grown significantly, now valued at $320 billion, with Tether's USDT and Circle Internet's USDC accounting for the majority of this figure. De Cos pointed out that the structure of stablecoins can resemble securities more than traditional currency, and that redemption issues 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 risk, 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 aims to establish federal rules for digital asset markets.
The bill has passed the House and is currently before the Senate, where committee chairmen are leading the effort to push it forward. A potential compromise on stablecoin yield could pave the way for further progress, although several open questions, including DeFi oversight and ethics provisions, need to be resolved.