The development of global standards for stablecoins has slowed down over the past year, sparking concerns among central bankers about potential market fragmentation and increased risk. According to Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, progress on international rules has stalled.
Bank for International Settlements General Manager Pablo Hernández de Cos expressed similar concerns, emphasizing the importance of global coordination to prevent a patchwork of regulations that companies could exploit. Without international alignment, firms may relocate to jurisdictions with more lenient 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, with a current value of $320 billion. De Cos noted 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.
To reduce risk, 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. A hearing is expected to take place in the second half of April, pending the resolution of several outstanding issues, including DeFi oversight and ethics provisions.