The development of global standards for stablecoins has experienced a 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 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 cooperation to prevent a patchwork of rules that companies could exploit. Without international alignment, firms may engage in regulatory arbitrage by shifting operations 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 significantly, now valued at $320 billion, with Tether's USDT and Circle Internet's USDC making up the majority of this figure.
According to de Cos, the structure of these stablecoins can resemble securities more than cash, and redemption issues can cause prices to deviate from their intended value of $1. Sudden withdrawals could also have a ripple effect on markets. To reduce risks, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities or deposit-insurance-type arrangements.
Policymakers believe these 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. A hearing is expected in the second half of April, pending resolution of several open questions, including DeFi oversight and ethics provisions.