The development of international standards for stablecoins has decelerated over the past year, causing concern among central bankers that inadequate oversight could lead to market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, stated that progress on global rules has stalled. This slowdown is a concern, according to Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos. De Cos emphasized the importance of global cooperation to prevent the creation of a patchwork of rules that companies could exploit by shifting operations to areas with less stringent oversight.
Major economies are moving forward with their own regulatory frameworks, often with different approaches and timelines. The stablecoin sector has grown significantly, reaching $320 billion, with Tether's USDT and Circle Internet's USDC making up the majority of this figure. De Cos noted that the structure of stablecoins can be more similar to securities than cash, and that difficulties in redeeming them can cause their prices to deviate from their intended value of $1. He also warned that sudden withdrawals could have a ripple effect on the markets.
To mitigate these risks, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities. Policymakers believe these 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 is currently before the Senate, where lawmakers are negotiating a compromise on stablecoin yield that could pave the way for its passage.