The development of global standards for stablecoins has slowed down 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. This has prompted the Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos to emphasize the importance of global coordination in avoiding a patchwork of rules that companies could exploit.
Without international alignment, firms may engage in regulatory arbitrage by shifting operations to jurisdictions with less stringent oversight. Major economies are pushing ahead with their own frameworks, often with different approaches and timelines. The stablecoin sector has grown significantly, with a current value of $320 billion, according to DeFiLlama, 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 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 reduce risk, 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 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 leading the push to resolve open questions, including DeFi oversight and ethics provisions, in order to move forward with the legislation.