The Financial Stability Board (FSB) has cautioned that stablecoins could reveal weaknesses in international financial oversight during periods of market stress. The G20’s financial watchdog is calling for stronger cooperation between countries, improved information exchange and coordinated contingency plans to address potential stablecoin disruptions or issuer failures.
In its latest report, the FSB said global stablecoins, which are cryptocurrencies pegged to traditional currencies, have not been tested through a severe financial crisis or the insolvency of a major issuer. Regulatory frameworks also vary across countries, creating uncertainty about how holders could reclaim their funds if a provider became insolvent.
The stablecoin market has grown from roughly $206 billion at the start of 2025 to approximately $306 billion. Tokens pegged to the U.S. dollar represent the majority of the market. While stablecoins are mainly used to transfer funds between cryptocurrency investments, the FSB said they could eventually support faster, lower-cost payments, including cross-border transactions.
“Global stablecoin arrangements are inherently cross-border, yet national regulations are taking shape at different speeds and cross-border cooperation in this area is still in its infancy,” FSB Chair Andrew Bailey wrote in a letter accompanying the report.
Shared Issuance Across Countries Could Increase Risks
The report identified multi-issuer arrangements as a potential source of instability. In these structures, affiliated companies issue the same stablecoin and share liability while maintaining reserves in separate jurisdictions.
If users rush to redeem their tokens through one company, that issuer could face substantial pressure even when sufficient reserve assets are held elsewhere within the group. Moving those assets across borders may be difficult during periods of financial stress, the FSB warned.
An issuer’s collapse could create further complications by raising questions about which country’s insolvency laws apply. Uncertainty over the legal process could delay or complicate the recovery of funds by stablecoin holders.
Redemption Surges Could Threaten Stablecoin Pegs
Stablecoins can be traded at any hour, but the markets for their backing assets do not necessarily operate continuously. This difference could become critical during a redemption surge if issuers cannot sell reserve assets quickly enough to meet withdrawal demands.
The resulting delays could cause a token to lose its intended peg, according to the FSB. However, the watchdog also noted that liquid secondary markets could help bring prices back toward their target through arbitrage trading.
Large-scale redemptions could have broader consequences if issuers are forced to sell reserve assets or withdraw bank deposits to raise cash. These actions could spread financial pressure into conventional markets as investors seek liquidity.
International Cooperation Needed to Close Oversight Gaps
The FSB identified limited information about stablecoin users as another challenge for regulators. Because blockchain transactions often involve pseudonymous addresses, authorities may find it difficult to determine where holders reside and which country’s rules apply.
The watchdog urged regulators to improve cross-border information sharing, strengthen monitoring and prepare coordinated responses to stablecoin distress or failure.
The recommendations are not legally binding, although FSB members generally work to incorporate agreed standards into their domestic regulatory systems.
Bailey, who also serves as governor of the Bank of England, has previously warned that international coordination on stablecoin regulation has stalled. The report comes ahead of the G20 finance ministers and central bank governors’ meeting scheduled for October 15.
