FSB Warns Stablecoin Rules Untested in Crisis, Calls for Cross-Border Cooperation
Key points
- The FSB's report warns that global stablecoins and national regulatory frameworks have not been tested under severe market stress or issuer insolvency, leaving holder recovery mechanisms uncertain.
- Multi-issuer stablecoin structures are identified as a specific risk: reserve assets held in separate jurisdictions may be difficult to mobilise if redemption demands concentrate on one entity during a crisis.
- The mismatch between stablecoins' 24/7 trading and traditional market operating hours could accelerate a de-pegging event, with forced reserve sales potentially spreading instability into conventional financial markets.
- The stablecoin market grew from approximately $206 billion at the start of 2025 to around $306 billion, with the majority pegged to the US dollar.
- FSB Chair Andrew Bailey noted that cross-border cooperation on stablecoins remains nascent; the report's non-binding recommendations were released days before the G20's 15 October 2026 ministerial meeting.
The Financial Stability Board (FSB), the G20’s global financial watchdog, has published a report warning that stablecoins remain untested under severe market stress and that national regulatory frameworks are developing at uneven speeds, creating meaningful gaps in cross-border crisis response. FSB Chair Andrew Bailey, who also serves as Governor of the Bank of England, acknowledged in an accompanying letter that cross-border cooperation in this area is still in its early stages, despite the inherently cross-border nature of global stablecoin arrangements.
The report flags multi-issuer stablecoin structures as a particular vulnerability. In these arrangements, affiliated companies can issue the same token and share liability while holding reserve assets in separate jurisdictions. If redemption demands concentrate on a single entity in the group while the necessary reserves sit elsewhere, moving those assets during a crisis may prove difficult. Legal ambiguity compounds the problem: if an issuer fails, it may be unclear which jurisdiction’s insolvency rules govern the recovery of holders’ funds.
The FSB also highlights the mismatch between stablecoins’ round-the-clock trading and the fixed operating hours of the traditional asset markets backing their reserves. During a run, if redemptions cannot keep pace with selling pressure, a token risks losing its peg. Forced reserve liquidations and bank deposit withdrawals could then transmit the shock into broader financial markets. The watchdog notes that pseudonymous transaction data makes it difficult to identify where holders are based, further complicating regulatory responses. While the FSB’s recommendations carry no binding legal force, member jurisdictions typically commit to implementing agreed standards domestically. The report’s publication comes just ahead of the G20 finance ministers and central bank governors’ meeting on 15 October 2026, and the stablecoin market has grown from approximately $206 billion at the start of 2025 to around $306 billion.