Work on setting global standards for stablecoins has slowed over the past year, raising concerns among central bankers who fear regulatory gaps could fragment markets and amplify risks.
Reuters reported last week that Andrew Bailey, governor of the Bank of England and chairman of the Financial Stability Board, said progress on international rules had stalled. Pablo Hernandez de Cos, managing director of the Bank for International Settlements (BIS), said in Japan on Monday that this was a cause for concern.
Decos said global coordination was crucial to avoid a patchwork of rules that companies could take advantage of, Reuters reported. Without international coordination, companies may shift operations to less regulatory jurisdictions, a practice known as regulatory arbitrage.
The warning comes as major economies push forward with their own frameworks, often on different timetables and with different approaches.
According to DeFiLlama, the stablecoin industry has continued to expand over the past few years and currently reaches $320 billion. Tether’s USDT and Circle Internet’s (CRCL) USDC account for the majority of this number. De Cos said they are structured more like securities than cash, noting that redemption friction could push the price away from its expected $1 value.
He also said a sudden divestment could ripple through the market. Suggestions to reduce risk include limiting interest payments on stablecoins and giving issuers access to central bank lending facilities or deposit insurance-type arrangements.
Policymakers believe such measures can make the industry more secure while retaining its role in digital payments.
In the United States, lawmakers are working to advance the Digital Asset Market Clarity Act, which would create federal rules for digital asset markets.
The bill passed the House last year and is now in the Senate, led by Banking Committee Chairman Tim Scott and Agriculture Committee Chairman John Bozeman. Senators Thom Tillis and Angela Alsobrooks have reached a compromise on stablecoin yields that could clear the way for a price increase, while Senator Cynthia Lummis, chair of the Banking Committee’s Digital Assets Subcommittee, said a hearing could be held in the second half of April.
The deal still depends on resolving several outstanding issues, including DeFi regulatory and ethics provisions.
