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.
This slowdown has raised concerns, with Bank for International Settlements General Manager Pablo Hernández de Cos emphasizing the importance of global coordination to prevent a patchwork of regulations that companies could exploit. Without international cooperation, firms may relocate to areas with more lenient oversight, a practice known as regulatory arbitrage. Major economies are pushing forward with their own frameworks, often with different approaches and timelines.
The stablecoin sector has grown significantly over the past few years, now accounting for $320 billion, with Tether's USDT and Circle Internet's USDC making up the majority of this figure. De Cos highlighted that the structure of stablecoins can resemble securities more than cash, and that redemption issues can cause price fluctuations.
Sudden withdrawals could also 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.
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 for its advancement. A deal remains contingent on resolving several open questions, including DeFi oversight and ethics provisions.