The development of global standards for stablecoins has experienced a significant slowdown over the past year, sparking concerns among central bankers about the potential for market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, has stated that progress on international rules has stalled, according to recent reports.
This has raised concerns with the Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos, who emphasized the importance of global cooperation to avoid a patchwork of regulations that companies could exploit. De Cos warned that without international alignment, companies may relocate to jurisdictions with more lenient oversight, a practice known as regulatory arbitrage.
As major economies push forward with their own frameworks, often with different timelines and approaches, the stablecoin sector continues to grow, now accounting for $320 billion. The sector's structure can resemble securities more than traditional currency, and redemption frictions can cause prices to deviate from their intended value. To reduce risk, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities.
Policymakers believe such measures can 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 leading the push for its approval. While a deal remains contingent on resolving several open questions, including DeFi oversight and ethics provisions, policymakers are working towards a compromise that could pave the way for a markup.