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. Bank for International Settlements General Manager Pablo Hernández de Cos expressed concerns about the lack of progress, emphasizing the need for global coordination to prevent a patchwork of rules that companies could exploit. Without international cooperation, firms may relocate to jurisdictions with less stringent oversight, a practice known as regulatory arbitrage.
As major economies move forward with their own frameworks, often with different timelines and approaches, the stablecoin sector has grown significantly, now valued at $320 billion. The sector's structure can resemble securities more than cash, with redemption frictions potentially driving prices away from their intended value.
To reduce risk, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities. Policymakers believe 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 negotiating a compromise on stablecoin yield to pave the way for a markup.