The development of global standards for stablecoins has experienced a slowdown over the past year, sparking 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 concerns about the lack of progress, emphasizing the importance of global cooperation to avoid a patchwork of regulations that companies could exploit. Without international alignment, firms may engage in regulatory arbitrage, shifting operations to jurisdictions with less stringent oversight.
As major economies move forward with their own frameworks, often with different approaches and timelines, the stablecoin sector continues to grow, with a current value of $320 billion. De Cos highlighted the need for international coordination, citing the potential for stablecoins to resemble securities more than cash, with redemption frictions that can drive prices away from their intended value.
He also warned about the risks of sudden withdrawals, which could have a ripple effect on markets. To mitigate 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 such measures could enhance the safety of the sector while preserving 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 and other provisions.