The development of global guidelines for stablecoins has experienced a slowdown 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 regulations has stalled, according to recent reports. This slowdown is a concern, as highlighted by Bank for International Settlements General Manager Pablo Hernández de Cos in a statement made in Japan.
De Cos emphasized the importance of global cooperation to prevent the creation of a patchwork of rules that companies could exploit, potentially leading to regulatory arbitrage. Without international coordination, firms may relocate to jurisdictions with less stringent oversight. Major economies are currently advancing their own frameworks, often with different timelines and approaches. The stablecoin sector has grown significantly over the past few years, now accounting for $320 billion, with Tether's USDT and Circle Internet's USDC comprising the majority of this figure.
According to de Cos, the structure of stablecoins can resemble securities more than traditional currency, and redemption issues 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 or deposit insurance-type arrangements.
Policymakers believe such measures can 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, which passed the House last year, is currently before the Senate, where committee chairs are leading the effort to move it forward.
A compromise on stablecoin yield has been negotiated, which could pave the way for a markup, and a hearing is potentially scheduled for the second half of April. However, a deal remains contingent on resolving several outstanding issues, including DeFi oversight and ethics provisions.