The development of global standards for stablecoins has decelerated 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.
This slowdown has raised concerns, with Bank for International Settlements General Manager Pablo Hernández de Cos emphasizing the importance of global cooperation to prevent a patchwork of regulations that companies could exploit. Without international alignment, firms may relocate to jurisdictions with less stringent oversight, a practice known as regulatory arbitrage. As major economies advance their own frameworks, often with different timelines and approaches, the stablecoin sector continues to grow, with a current value of $320 billion.
The sector's structure can resemble securities more than traditional currency, with redemption frictions potentially causing price deviations 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 can enhance the sector's safety while preserving its role in digital payments. In the United States, lawmakers are working to pass the Digital Asset Market Clarity Act, which aims to establish federal rules for digital asset markets.
The bill's progress is contingent on resolving several open questions, including DeFi oversight and ethics provisions.