The development of global standards for stablecoins has experienced a slowdown over the past year, prompting 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 come to a standstill. Bank for International Settlements General Manager Pablo Hernández de Cos expressed similar concerns, emphasizing the importance of global cooperation to prevent a patchwork of regulations that companies could exploit. Without international coordination, firms may relocate to jurisdictions with more lenient oversight, a practice known as regulatory arbitrage.
The stablecoin sector has grown significantly, with a current value of $320 billion, according to DeFiLlama, with Tether's USDT and Circle Internet's USDC accounting for the majority of this figure. De Cos pointed out that the structure of these 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 the market. 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 believe 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 aims to establish federal rules for digital asset markets. The bill has passed the House and is currently before the Senate, where lawmakers are negotiating a compromise on stablecoin yield that could pave the way for a markup. A hearing is expected to take place in the second half of April, although a deal remains contingent on resolving several outstanding issues, including DeFi oversight and ethics provisions.