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, according to recent reports.

This slowdown is a concern, as highlighted by Bank for International Settlements General Manager Pablo Hernández de Cos in a recent statement in Japan. De Cos emphasized the importance of global coordination to prevent a patchwork of rules that companies could exploit, shifting operations to areas with less stringent oversight.

The warning comes as major economies move forward with their own stablecoin frameworks, often with different approaches and timelines. The stablecoin market has grown significantly over the past few years, now valued at $320 billion, with Tether's USDT and Circle Internet's USDC making up the majority of this figure.

De Cos pointed out that the structure of stablecoins can resemble securities more than traditional currency, with redemption issues potentially causing price fluctuations. He also warned that sudden large-scale withdrawals could have a ripple effect through markets. To reduce these risks, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities or deposit insurance-like arrangements.

Policymakers believe such measures could enhance the safety of the stablecoin 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, with key senators pushing for its progression. A potential compromise on stablecoin yield could pave the way for further action, although several issues, including DeFi oversight and ethics provisions, still need to be resolved.