The development of global standards for stablecoins has decelerated 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 for Bank for International Settlements General Manager Pablo Hernández de Cos, who emphasized the importance of global cooperation to prevent a patchwork of regulations that companies could exploit.
De Cos warned that without international alignment, firms may relocate to jurisdictions with more lenient oversight, a practice known as regulatory arbitrage. The stablecoin market has grown significantly over the past few years, with a current value of $320 billion, according to DeFiLlama.
Major players such as Tether's USDT and Circle Internet's USDC dominate the market. However, de Cos pointed out that the structure of stablecoins can resemble securities more than traditional currency, and redemption issues can cause prices to deviate from their intended value of $1. He also highlighted the risk of sudden withdrawals, which could have a ripple effect on the market. To mitigate these risks, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities or deposit insurance.
Policymakers believe that such 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 has passed the House and is currently before the Senate, where lawmakers are negotiating a compromise on stablecoin yield. A hearing on the bill is expected to take place in the second half of April, pending the resolution of several outstanding issues, including DeFi oversight and ethics provisions.