The development of global standards for stablecoins has slowed down over the past year, sparking concerns 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, noted that progress on international rules has stalled. This has raised concerns with Bank for International Settlements General Manager Pablo Hernández de Cos, who emphasized the importance of 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 move forward with their own frameworks, often with different timelines and approaches, the stablecoin sector continues to grow, now valued at $320 billion.
The two largest stablecoins, Tether's USDT and Circle Internet's USDC, make up the majority of this figure. According to de Cos, the structure of these stablecoins can resemble securities more than cash, and redemption issues can cause prices to deviate from their intended value of $1. He also warned that sudden withdrawals 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. 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 and other issues.