A report published by the Financial Stability Institute on Tuesday warned about the need for uniform regulatory frameworks for stablecoins across different countries.

The FSI, a collaboration between the Bank for International Settlements (BIS) and the Basel Committee on Banking Supervision, emphasized the critical role of consistent policies in bolstering the global financial system.

“Stablecoins may still be unregulated or lightly regulated in other jurisdictions,” said the report,

Authored by FSI Deputy Chair Juan Carlos Crisanto and Senior Advisors Johannes Ehrentraud and Denise Garcia Ocampo, the document points out that despite common regulatory themes, differences largely stem from stablecoins’ unique designs and perceived risks. The report argues that the fragmentation could challenge financial stability worldwide.

Countries have been grappling with stablecoin regulation for years. The U.K. recently recognized stablecoins as a payment method in 2023, and the European Union implemented the Markets in Crypto Assets (MiCA) regulation to oversee stablecoin activities.

Japan has also introduced regulations, while the U.S. contemplates similar legislative measures. The FSI’s findings indicate varying stablecoin definitions and categorizations, alongside inconsistencies in reserve asset disclosure requirements by issuers, could endanger financial stability.

The report advocates for a globally consistent regulatory approach to mitigate risks, prevent regulatory arbitrage, and ensure fairness within the digital asset landscape. Moreover, it underscores the importance of ensuring stablecoins are interoperable with central bank digital currencies (CBDCs) and other digital assets to promote a cohesive financial ecosystem.

International bodies like the International Monetary Fund and the Financial Stability Board echo the call for global standards, which either issue or develop universal norms for stablecoins.