The development of global standards for stablecoins has decelerated 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, noted 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 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 sector's structure can be more similar to securities than cash, with redemption frictions potentially driving prices away from their intended value.
To reduce risk, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities. Policymakers believe such 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 has passed the House and is currently before the Senate, where lawmakers are negotiating a compromise on stablecoin yield. A deal is contingent on resolving open questions, including DeFi oversight and ethics provisions.