The Financial Stability Board (FSB) has issued a stark warning about the unpreparedness of global stablecoin regulations for severe market crises. In his letter to the G20 Finance Ministers and Central Bank Governors, Chair Andrew Bailey highlighted vulnerabilities in global stablecoins, including multi-issuance arrangements such as Circle's USDC and Paxos Global Dollar, which are both issued from multiple locations. According to the G20's financial watchdog, global stablecoins and national rules remain untested in severe market crises, creating significant risks for redemption and reserve delays. As reported by the FSB, Chair Andrew Bailey emphasized that "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."
The stablecoin market has experienced substantial growth, starting 2025 at around $206 billion in capitalization and growing to $306 billion. Most of this value is concentrated in stablecoins pegged to the U.S. dollar, with much of the value currently used for moving in and out of crypto investments. However, as reported by the FSB, the watchdog highlighted higher risks in multi-issuer structures, where affiliated companies can issue the same stablecoin while keeping reserve assets in separate jurisdictions. This structure creates potential for redemption demands to pile up on a single entity while needed assets remain elsewhere. The FSB noted that most stablecoin usage is still concentrated in crypto markets as well as some usage as a store of value in emerging economies. According to the latest FSB data, stablecoins had about $300 billion in market value in mid 2026, with dollar pegged tokens representing 99% of that market by value.
The FSB identified several operational and legal complications that could emerge during a crisis. According to the report, stablecoins can trade around the clock while asset backing markets have set operating hours, creating a mismatch that could matter during a run. The watchdog warned that if redemptions cannot keep pace with selling, a token may lose its peg. Additionally, the pseudonymous nature of cryptocurrency transactions can make it hard to determine where holders are based and which jurisdiction applies, creating weak data problems for regulatory oversight. The FSB also identified the international mobility of stablecoins as a source of risk, noting that multi-issuance stablecoins are designed to rebalance reserves across jurisdictions to match where holders redeem, but this location can shift quickly and cannot always be tracked. The report specifically highlights that an issuer may not know the location of holders or where redemption demand will arise, with exchanges knowing some customers under identification procedures without knowing the final location of tokens withdrawn to outside wallets.
The FSB has identified significant gaps in tracking stablecoin holders, reserves, and redemption flows across borders. According to the report, public blockchain data often cannot reliably identify the country or purpose of a transfer, with a basic question like "How much stablecoin crossed the border this week?" requiring reliable country labels at both ends, consistent rules for multi-chain bridges, and exclusion of self-transfers. The watchdog divides data problems into structural gaps from pseudonymity and smart contract architecture, and more tractable gaps including information that exists but is not shared with authorities. Private data compilers currently provide much of the information authorities use, but their clustering rules and filtering methods may differ significantly. The FSB proposes monitoring the depth, liquidity and structure of secondary markets, along with the geographic distribution of holdings, redemptions and reserve assets, particularly for multi-issuer structures where geography is especially relevant. The report emphasizes that a single aggregate reserve ratio cannot reveal the distribution of reserves versus redemption demand geography.
The FSB has called for improved monitoring of cross-border stablecoin vulnerabilities and is calling for further adoption of its 2023 recommendations on global stablecoins, which could bring more consistency to the regulatory patchwork worldwide. While these recommendations are not legally binding, FSB members typically commit to putting agreed standards into practice nationally. According to the report, forced reserve sales and bank deposit withdrawals could spread shock into traditional financial markets as investors scramble for liquidity. The FSB also encourages deeper cross-border cooperation between supervisors and wants more research into planning for stablecoin distress or failure. The paper emphasized the need for improved data quality, noting that while focusing on risks can produce a one-sided picture, the FSB struck a more balanced tone in its assessment of stablecoins as "a potentially beneficial innovation." The report specifically calls for information sharing agreements, comparable reports and crisis plans to let existing authorities form a less fragmented picture, though it acknowledges that a single global regulator is not the solution.
