The development of global standards for stablecoins has experienced a significant slowdown 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 stalled.
This development has prompted the General Manager of the Bank for International Settlements, Pablo Hernández de Cos, to stress the importance of global cooperation in avoiding a patchwork of regulations that companies could exploit. De Cos warned that without international alignment, firms may relocate to jurisdictions with less stringent oversight, a practice known as regulatory arbitrage.
As major economies push forward with their own frameworks, often with different approaches and timelines, the stablecoin sector continues to grow, currently valued at $320 billion. The sector's largest players, Tether's USDT and Circle Internet's USDC, account for the majority of this figure. According to de Cos, the structure of these stablecoins can resemble securities more than traditional currency, and redemption issues can cause prices to deviate from their intended value of $1.
He also highlighted the risk 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.
Lawmakers 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, currently before the Senate, seeks to provide clarity on the regulation of digital assets, including stablecoins.