The development of global stablecoin standards has slowed down over the past year, raising concerns among central bankers about potential 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. Bank for International Settlements General Manager Pablo Hernández de Cos expressed concern about the lack of progress, emphasizing the need for global coordination to prevent a patchwork of rules that companies could exploit.
Without international alignment, firms may relocate to jurisdictions with less stringent oversight, a practice known as regulatory arbitrage. As major economies establish their own frameworks, often with different approaches and timelines, the stablecoin sector continues to grow, with a current value of $320 billion.
De Cos pointed out that the structure of stablecoins, such as Tether's USDT and Circle Internet's USDC, can resemble securities more than cash, and that redemption frictions can cause prices to deviate from their intended value. He also warned about the potential risks of sudden withdrawals, which could have a ripple effect on markets. To reduce these 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 and other issues.