The development of global standards for stablecoins has slowed down over the past year, sparking concerns among central bankers that gaps in regulation could lead to market fragmentation and increased risk. Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, reported that progress on international rules has stalled. This has raised concerns for Bank for International Settlements General Manager Pablo Hernández de Cos, who emphasized the importance of global coordination to prevent a patchwork of regulations that companies could exploit.
Without international alignment, companies 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 timelines and approaches, the stablecoin sector continues to grow, now accounting for $320 billion. The sector's structure can resemble securities more than cash, with redemption frictions potentially causing prices to deviate from their intended value.
To reduce risk, proposals include limiting interest payments on stablecoins and providing issuers with access to central bank lending facilities or deposit-insurance-type arrangements. 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 would establish federal rules for digital asset markets.
The bill has passed the House and is currently before the Senate, where lawmakers are leading the push for its advancement.