The development of global standards for stablecoins has slowed down over the past year, sparking concerns among central bankers that regulatory gaps could lead to market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, stated that progress on international rules has stalled.
Bank for International Settlements General Manager Pablo Hernández de Cos expressed concern about this slowdown, emphasizing the importance of global coordination to prevent a patchwork of rules that companies could exploit. Without international alignment, firms may engage in regulatory arbitrage by shifting operations to jurisdictions with more lenient oversight. As major economies push forward with their own frameworks, often with different timelines and approaches, the stablecoin sector continues to grow, now valued at $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. He also warned that sudden withdrawals could have a ripple effect on markets.
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 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 key issues.