The development of global stablecoin standards has slowed down over the past year, sparking concerns among central bankers about potential market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, noted that progress on international rules has come to a halt, according to recent reports. This has raised concerns for Bank for International Settlements General Manager Pablo Hernández de Cos, who emphasized the importance of global cooperation to avoid 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.
As major economies forge ahead with their own frameworks, often with different approaches and timelines, the stablecoin sector continues to grow, currently valued at $320 billion. The sector's structure can be more similar to securities than cash, and sudden withdrawals can have far-reaching consequences. To mitigate these risks, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities.
Policymakers believe such measures can enhance the sector's safety 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 effort to push it forward.
While a deal is contingent on resolving several open questions, including DeFi oversight and ethics provisions, a hearing could take place in the second half of April.