The FSB says stablecoins are untested in a crisis

The Financial Stability Board on Monday published a note to the G20 on the cross-border vulnerabilities of global stablecoin arrangements and the data available to monitor them, the body said in a press release. It accompanies a letter from the FSB's chair, Andrew Bailey, who is also Governor of the Bank of England, to G20 finance ministers and central bank governors ahead of their meeting on Thursday 15 October, which the FSB's listing places in Bangkok.

Its plainest sentence is near the middle. "Global stablecoins and national regulatory frameworks remain untested in severe stress and insolvency," the note says. It runs to five pages, summarises work under way at the FSB rather than setting new standards, and carries the board's usual statement that its activities are not binding.

On scale, the FSB puts the total market value of stablecoins at "around $300 billion" as of mid-2026, "essentially unchanged from a year earlier", with 99 per cent by value pegged to the US dollar. By our arithmetic, and allowing for the rounding, that is roughly $297bn in dollar-pegged tokens and about $3bn in everything else. The FSB does not name its data source, and says elsewhere in the note that authorities rely mostly on private compilers whose methods "may vary in both accuracy and transparency".

The vulnerabilities it describes are structural. A bank knows its depositors, the note says, while a global stablecoin issuer "may not know who holds its liabilities, where those holders are domiciled, or, in some cases, where redemption demand will materialise". Round-the-clock secondary trading could speed up a sell-off if redemptions cannot keep pace. A run, it says, could spill into traditional finance through fire sales of reserve assets, bank deposit withdrawals to fund redemptions, payment dependencies and foreign exchange markets.

It singles out the "multi-issuer" model, in which affiliated issuers share liability for one stablecoin but hold separate reserves. If holders can redeem with any issuer, demand could concentrate on one entity, and rebalancing reserves across borders "may break down during stress". Where holders' locations are hard to establish, the note says, the attribution of liabilities and holders' legal claims "may be unclear in stress and in insolvency", and it may be hard to tell which national insolvency regime applies.

On regulation, the FSB says the way national frameworks interact "remains uncertain or undefined in many jurisdictions", including the treatment of foreign-issued stablecoins, and that this has created room for arbitrage, "with some issuers choosing to locate in and operate from more lightly regulated or unregulated jurisdictions". Emerging and developing economies face added risks from currency substitution and bank disintermediation, so that stablecoins could become systemic there "at a lower threshold of use".

The data section is the most cautious. Availability has "improved significantly in recent years", largely through industry effort, the FSB says, but some limits, such as the pseudonymity of public blockchains, are likely to persist. It suggests three next steps for authorities: develop monitoring metrics and identify data gaps; make better use of existing data through cross-border cooperation; and explore industry best practices for compiling data on- and off-chain.

The policy asks are modest. The note names three areas "that may warrant continued consideration": monitoring cross-border vulnerabilities, supporting implementation of the 2023 recommendations through cooperation and information-sharing, and gathering information on how arrangements plan for distress or failure. Bailey's letter is blunter, saying national rules are "taking shape at different speeds" and that cross-border cooperation "is still in its infancy". It also notes that stablecoins feature in discussions of fraud, "particularly those operating from lightly regulated jurisdictions".

The same letter covers bond markets, private credit and artificial intelligence, which we report separately. Meanwhile national authorities are acting on their own: Komposite reported on Saturday that a French parliamentary committee backed a tax on stablecoin swaps, and last week that Europe's securities regulator told national supervisors to expect licensed firms to stop serving non-compliant stablecoins. The international work, on the FSB's own account, is still at the monitoring stage.