International Financial Watchdog Seeks Stronger Coordination for Stablecoin Crisis Management

The Financial Stability Board (FSB) has cautioned that stablecoins could expose weaknesses in the global financial system if a major market disruption occurs. The G20’s financial watchdog is calling on regulators to strengthen international cooperation, exchange information more effectively and prepare coordinated responses to potential stablecoin crises.

In a new report, the FSB said global stablecoins—digital tokens pegged to traditional currencies—have not been tested during extreme market stress or the failure of an issuer. Regulatory frameworks are also evolving at different speeds across countries, leaving uncertainty about how investors could recover their holdings if a stablecoin provider becomes insolvent.

The stablecoin market has expanded from around $206 billion at the beginning of 2025 to approximately $306 billion. Most of this capitalization comes from tokens linked to the U.S. dollar. While stablecoins are largely used to transfer funds between cryptocurrency investments, the FSB said they could eventually facilitate quicker and cheaper payments, including international transfers.

“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.

Multiple Issuers Could Increase Stablecoin Vulnerabilities

The report highlighted risks associated with stablecoins issued by several affiliated companies. These arrangements allow multiple entities to issue the same token and share responsibility for its obligations while holding reserve assets in separate countries.

If redemption requests surge at one issuer, the company could struggle to meet demand even if other entities within the group hold sufficient reserves. Moving those assets between jurisdictions could become more challenging during a crisis, the FSB warned.

The failure of an issuer could also raise questions about which country’s insolvency laws govern the process, potentially complicating the recovery of funds by token holders.

Continuous Trading Could Put Pegs Under Pressure

Stablecoins can be traded around the clock, but the markets for their backing assets operate on more restricted schedules. During a sudden rush to redeem tokens, issuers might be unable to sell reserves quickly enough to satisfy withdrawal requests, potentially pushing a stablecoin away from its intended peg.

The FSB noted that liquid secondary markets could help restore price stability through arbitrage, allowing traders to profit from differences between a token’s market price and its target value.

However, large-scale redemptions could force issuers to liquidate reserve assets and withdraw bank deposits. These actions could transmit stress to traditional financial markets as institutions and investors seek additional liquidity.

FSB Calls for Better International Information Sharing

The watchdog also identified gaps in information about stablecoin holders as an obstacle to effective oversight. Because blockchain transactions often use pseudonymous addresses, authorities may find it difficult to establish users’ locations and determine which country’s regulations apply.

The FSB recommended stronger cross-border information sharing, improved monitoring and coordinated contingency plans for stablecoin distress or issuer failure.

Although these recommendations are not legally binding, member jurisdictions generally work to incorporate agreed standards into their national regulatory frameworks.

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.