The development of global standards for stablecoins has experienced a slowdown over the past year, raising concerns among central bankers that inadequate oversight could lead to market fragmentation and increased risk. Andrew Bailey, Governor of the Bank of England and Chairman of the Financial Stability Board, noted that progress on international rules has stalled. Bank for International Settlements General Manager Pablo Hernández de Cos expressed concern about this slowdown, emphasizing the importance of global coordination to prevent a patchwork of regulations that companies could exploit.
Without international cooperation, firms may relocate to jurisdictions with less stringent oversight, a practice known as regulatory arbitrage. As major economies move forward with their own frameworks, often with different timelines and approaches, the stablecoin sector continues to grow, currently valued at $320 billion. The sector's structure can resemble securities more than traditional currency, and sudden withdrawals can have far-reaching consequences. To reduce risk, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities.
Policymakers believe these measures can enhance the sector's safety 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, where lawmakers are negotiating a compromise on stablecoin yield and other key issues.