The development of global standards for stablecoins has experienced a significant 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, has noted that progress on international rules has stalled, as reported by Reuters.
This has raised concerns for Bank for International Settlements General Manager Pablo Hernández de Cos, who emphasized the importance of global cooperation in avoiding a patchwork of regulations that companies could exploit. Without international alignment, firms may relocate to jurisdictions with more lenient oversight, a practice known as regulatory arbitrage.
The stablecoin sector has experienced substantial growth over the past few years, with a current value of $320 billion, according to DeFiLlama, with Tether's USDT and Circle Internet's USDC accounting for the majority of this figure. De Cos has 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 of $1.
He also warned that sudden withdrawals could have a ripple effect on markets. To mitigate these risks, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities or deposit-insurance-type arrangements. Policymakers argue 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 would establish federal rules for digital asset markets. The bill, which passed the House last year, is currently before the Senate, where committee chairmen are leading the effort to push it forward. While a compromise on stablecoin yield has been negotiated, a deal remains contingent on resolving several outstanding issues, including DeFi oversight and ethics provisions.