Work on global standards for stablecoins has slowed over the past year, raising concerns among central bankers that reduced oversight could fragment the market and increase risk.
Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board, said progress on international rules has stalled, as Reuters reported last week. This is a matter of concern, Pablo Hernandez de Cos, general manager of the Bank for International Settlements (BIS), said in Japan on Monday.
According to Reuters, De Caus said global coordination was important to avoid a patchwork of rules that companies could take advantage of. Without international alignment, companies may move operations to jurisdictions with lighter oversight, known as regulatory arbitrage.
The warning comes as major economies are moving forward with their own frameworks, often on different timelines and with different approaches.
According to DeFiLlama, the stablecoin sector has expanded over the past few years and now accounts for $320 billion. Tether’s USDT and Circle Internet (CRCL) USDC make up the majority of that figure. De Caus said their structure may resemble securities more than cash, noting that redemption friction could push prices away from their intended $1 value.
He also said that sudden withdrawals could create panic in the market. Proposals to reduce the risk include limiting interest payments on stable coins and giving issuers access to central bank lending facilities or deposit-insurance-type arrangements.
Policymakers argue that such measures could secure the sector while preserving its role in digital payments.
In the US, lawmakers are working to advance the Digital Asset Markets Clarity Act, which would set federal regulations for digital asset markets.
The bill passed the House last year and now heads to the Senate, where Banking Committee Chairman Tim Scott and Agriculture Committee Chairman John Boozman are leading the proposal. Senators Thom Tillis and Angela Alsobrooks have negotiated an agreement on stablecoin yields that could clear the way for the markup, while Senator Cynthia Loomis, who chairs the Banking Committee’s digital assets subcommittee, has said a hearing could take place in the second half of April.
The deal is contingent on the resolution of several open questions, including DeFi oversight and ethics provisions.