The development of global guidelines for stablecoins has decelerated over the past year, sparking concerns among central bankers about potential market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, noted that progress on international regulations has stalled.
This slowdown is a cause for concern, according to Bank for International Settlements General Manager Pablo Hernández de Cos. De Cos emphasized the importance of global coordination to prevent a patchwork of regulations that companies could exploit by relocating to areas with less stringent oversight. The warning comes as major economies move forward with their own frameworks, often with different approaches and timelines.
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. De Cos pointed out that the structure of stablecoins can resemble securities more than traditional currency, and that difficulties in redeeming them can cause price fluctuations.
He also warned that sudden withdrawals could 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.
Policymakers believe these measures could enhance the safety of the sector while preserving its role in digital payments. In the United States, 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 committee chairs are leading the effort to move it forward.
A compromise on stablecoin yield has been negotiated, and a hearing is expected in the second half of April. However, a deal is contingent on resolving several outstanding issues, including oversight of decentralized finance and ethics provisions.