The slowdown in global standards work for stablecoins over the past year has caused concern among leading central bankers. It is stated that this pause in the sector may trigger the fragmentation of markets and an increase in financial risks due to audit gaps.
Lack of control brings new risks to the agenda
According to information provided by Bank of England Governor Andrew Bailey to Reuters, the Financial Stability Board’s progress on global stablecoin rules has almost come to a halt recently. Pablo Hernández de Cos, General Manager of the Bank for International Settlements (BIS), also emphasized in his latest statement in Japan that this slowdown poses significant risks.
According to De Cos’ statements, global harmonization could ensure that the rules are gathered under a single roof instead of being implemented piecemeal. Otherwise, it was warned that companies could benefit from weak regulations in different countries and audit gaps could increase.
The formation of disconnected regulations on a global scale may lead to fragmentation of markets and increased risks.
This uncertainty in the sector is becoming more evident as major economies establish their own regulatory frameworks. Achieving full compliance is becoming increasingly difficult as countries operate with different practices and timelines.
Rapid growth in the stablecoin market
The stablecoin market has seen significant growth in recent years. According to DeFiLlama data, currently the total volume of the market has reached 320 billion dollars. The majority of this volume consists of Tether’s USDT and Circle’s USDC.
Pablo Hernández de Cos argues that stablecoin structures sometimes resemble securities and are not traded like cash. He also points out that delays and disruptions in redemption transactions can push the stablecoin price away from the targeted $1 level.
It is stated that sudden investor exits can have a chain effect in all markets. To reduce risks, suggestions such as limiting interest payments, providing stablecoin issuers with access to central bank loans or systems similar to deposit insurance have been brought to the agenda.
Critical steps and legislative proposals from the USA
Policymakers believe such measures could make the stablecoin market safer; He is of the opinion that it can maintain its role in digital payments.
In the USA, steps are being taken to enact the Digital Asset Market Transparency Act. The proposal, which was passed in the House of Representatives last year, is currently being discussed in the Senate. Banking Committee Chairman Tim Scott and Agriculture Committee Chairman John Boozman are handling the process.
Senators Thom Tillis and Angela Alsobrooks reached a compromise on stablecoin returns, paving the way for the legal process. Senator Cynthia Lummis, Chair of the Digital Assets Subcommittee of the Banking Committee, stated that a hearing on the bill is on the agenda to be held in the second half of this year.
However, in order to reach a final agreement, various questions need to be answered, especially the auditing and ethical rules in the field of decentralized finance (DeFi).
