The development of global standards for stablecoins has experienced a slowdown 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 regulations that companies could exploit. Without international cooperation, firms may relocate to jurisdictions with more lenient oversight, a practice known as regulatory arbitrage.
As major economies establish their own frameworks, often with different approaches and timelines, the stablecoin sector continues to grow, with a current value of $320 billion. The sector's structure can be more similar to securities than cash, and redemption issues can cause price fluctuations.
To reduce risk, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities. Lawmakers in the U.S.
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 and other key issues.