The development of global standards for stablecoins has experienced a slowdown over the past year, sparking concerns among central bankers that inconsistencies in regulation could lead to market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, has stated 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 cooperation to prevent a fragmented regulatory landscape that companies could exploit.
Major economies are moving forward with their own frameworks, often with different approaches and timelines, which could lead to regulatory arbitrage. The stablecoin sector has grown significantly, now valued at $320 billion, with Tether's USDT and Circle Internet's USDC making up the majority of this figure.
According to de Cos, the structure of stablecoins can be more similar to securities than cash, and redemption issues can cause prices to deviate from their intended value of $1. Sudden withdrawals could also have a ripple effect on markets. To reduce 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 these measures could make the sector safer while maintaining 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 working to resolve open questions, including DeFi oversight and ethics provisions, to move the legislation forward.