The development of global standards for stablecoins has decelerated over the past year, sparking concerns among central bankers that gaps in 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 slowdown has raised concerns, with Bank for International Settlements General Manager Pablo Hernández de Cos emphasizing the importance of global coordination to avoid a patchwork of rules that companies could exploit. De Cos warned that without international alignment, firms may relocate to jurisdictions with less stringent oversight. Major economies are moving 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. De Cos highlighted that the structure of stablecoins can resemble securities more than cash, and that redemption issues can cause prices to deviate from their intended value. He also noted 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 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 pushing for its advancement. A deal is contingent on resolving several open questions, including DeFi oversight and ethics provisions.