The global push for stablecoin regulation is stuck in neutral — just as the market rockets to new highs. Bank of England Governor Andrew Bailey told Reuters that the Financial Stability Board (FSB) has made little headway on setting international rules for stablecoins. Pablo Hernández de Cos, General Manager of the Bank for International Settlements (BIS), sounded the alarm during a recent speech in Japan, calling the slowdown a serious risk for the financial system.
Fragmented Regulation Creates Loopholes
De Cos stressed the need for global consistency under a single framework rather than piecemeal national approaches. Otherwise, firms could exploit weak regulations in certain jurisdictions, widening enforcement gaps. “Fragmented regulation worldwide could split markets and lead to increased risks,” he warned. As major economies forge ahead with their own timelines, the chance for full alignment grows slimmer.
Stablecoin Market Surges to $320 Billion
On the other side of the coin, growth is explosive. Data from DeFiLlama pegs total stablecoin market cap at $320 billion, dominated by Tether’s USDT and Circle’s USDC. De Cos, however, argued that many stablecoins behave more like securities than cash, and their redemption delays can drag values away from the $1 peg. Sharp investor exits could trigger cascading effects. To mitigate this, experts propose capping interest payments on stablecoins and exploring options like central bank lending access or deposit insurance-style protections for issuers.
U.S. Legislation Inches Forward
Policymakers believe these safeguards could make stablecoins safer while preserving their role in digital payments. In the United States, the Digital Asset Market Structure Transparency Act has cleared the House and is now under Senate review, led by Banking Committee Chair Tim Scott and Agriculture Committee Chair John Boozman. Senators Thom Tillis and Angela Alsobrooks reached an agreement on stablecoin yields, keeping negotiations alive. Senator Cynthia Lummis, who chairs the Subcommittee on Digital Assets, signaled a dedicated hearing on the bill likely in the second half of this year. Still, unresolved questions around decentralized finance (DeFi) oversight and ethical frameworks remain — obstacles that must be tackled before final consensus can be reached.