The Financial Stability Board (FSB) has warned that the rapid expansion of stablecoins could create vulnerabilities in the global financial system, particularly if a major issuer faces a crisis. The G20’s financial watchdog is urging regulators worldwide to improve information sharing, coordinate supervision and prepare joint responses to potential stablecoin failures.

In a new report, the FSB said global stablecoins—digital assets designed to maintain a fixed value against traditional currencies—have not been tested under extreme market conditions or during an issuer’s insolvency. Differences in the pace of national regulation could also complicate efforts by holders to recover their money if a provider fails.

The stablecoin market has increased from approximately $206 billion at the start of 2025 to about $306 billion. U.S. dollar-linked tokens account for most of that total. Although stablecoins are primarily used to move funds between crypto investments, the FSB noted that they could eventually make payments faster and less expensive, including across international borders.

“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 said in an accompanying letter.

Multi-Issuer Stablecoins Could Complicate Crisis Response

The watchdog identified arrangements involving multiple issuers as a particular concern. Under these models, affiliated companies issue the same stablecoin and share liability, while keeping reserve assets in different countries.

If users seek to redeem their holdings through one issuer simultaneously, that company could face a shortage of immediately available assets even if other members of the group hold sufficient reserves. Transferring funds between jurisdictions during a crisis could prove difficult, the report cautioned.

The collapse of an issuer could also create uncertainty over which country’s insolvency laws would apply, potentially delaying the process of determining claims and returning funds to holders.

Market Hours Could Put Stablecoin Pegs at Risk

Stablecoins can trade continuously, but the markets for their backing assets have limited operating hours. During a sudden wave of redemptions, issuers might struggle to liquidate reserves quickly enough to meet demand, potentially causing tokens to trade below their intended value.

However, the FSB noted that deep and liquid secondary markets could help restore a stablecoin’s peg through arbitrage, as traders take advantage of price differences.

Heavy redemption pressure could also force issuers to sell reserve assets and withdraw bank deposits, potentially spreading instability into traditional financial markets as participants compete for liquidity.

Regulators Urged to Strengthen Cross-Border Coordination

The FSB said incomplete data on stablecoin holders presents another challenge for international supervision. Cryptocurrency transactions often involve pseudonymous addresses, making it difficult for authorities to identify users’ locations and establish which jurisdiction has regulatory responsibility.

The watchdog called for better cross-border information exchange, stronger monitoring and coordinated contingency planning for stablecoin distress or issuer failure.

Although the FSB’s recommendations are not legally binding, member jurisdictions generally seek to implement agreed standards through their domestic regulatory systems.

Bailey, who also serves as governor of the Bank of England, has previously warned that international efforts to coordinate stablecoin rules have stalled. The report was released ahead of the G20 finance ministers and central bank governors’ meeting scheduled for October 15.