The development of global standards for stablecoins has experienced significant slowdown over the past year, prompting 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 regulations has stalled, as reported by Reuters. Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos expressed similar concerns, emphasizing the importance of global cooperation to prevent a patchwork of rules that companies could exploit, resulting in regulatory arbitrage. De Cos warned that without international alignment, firms may relocate to jurisdictions with less stringent oversight.
Major economies are pushing forward with their own frameworks, often with different approaches and timelines. The stablecoin sector has grown substantially over the past few years, now valued at $320 billion, according to DeFiLlama, with Tether's USDT and Circle Internet's USDC dominating the market.
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 highlighted the potential risks of sudden withdrawals, which 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 aims to establish federal rules for digital asset markets. The bill, which passed the House last year, is currently before the Senate, where lawmakers are leading efforts to push it forward. A deal is contingent on resolving several open questions, including DeFi oversight and ethics provisions.