The development of global standards for stablecoins 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 regulations has stalled.
Bank for International Settlements General Manager Pablo Hernández de Cos expressed concern about the slowdown, 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. The sector's structure can resemble securities more than traditional currency, with redemption frictions potentially causing price fluctuations.
To reduce risk, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities. Policymakers believe such measures could enhance the sector's safety while maintaining 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 lawmakers are negotiating a compromise on stablecoin yield to pave the way for a markup. A hearing is expected in the second half of April, pending the resolution of several open questions, including DeFi oversight and ethics provisions.