The Financial Stability Board published a note Monday warning that a run on a global stablecoin could spill into traditional finance through three specific channels, and that sorting out who is liable when a cross-border issuer fails may be close to impossible under current rules. The report lands as the stablecoin market sits at roughly $300 billion, essentially flat from a year ago, with 99% of that value still pegged to the US dollar.
Three channels, one problem
The FSB names the transmission routes plainly. First, fire sales of reserve assets. Second, bank deposit withdrawals to fund redemptions. Third, disruption where a stablecoin is used for real-economy payment or settlement. Each is plausible on its own. Together they describe how a crypto-native problem becomes a banking problem.
Foreign exchange exposure is the quieter issue. Stablecoins carrying cross-border transactions leave holders and issuers exposed to currency moves that don't show up in a dollar-denominated peg. The FSB doesn't downplay it.
The multi-issuer trap
Multi-issuer arrangements get particular attention. Affiliated issuers can share liability for a single token while holding separate reserve pools. When redemption demand spikes, it can concentrate at one entity — the one least equipped to absorb it. And because holdings are pseudonymous, assigning liabilities among issuers is guesswork. Which entity does a holder have a claim against during insolvency? The FSB says that's often unclear.
Then there's the jurisdictional question. Determining which national insolvency regime applies to a global stablecoin arrangement may be difficult. That's a polite way of saying nobody's quite sure.
Reserves in the wrong places
Lower-quality or less-liquid reserve assets amplify liquidity and operational vulnerabilities. The problem compounds when those reserves sit in jurisdictions that haven't implemented the FSB's recommendations — a gap the board flags without naming countries.
Emerging market and developing economies face a different math. Currency substitution, bank disintermediation, and capital-flow management pressures mean systemic exposure can arrive at a far lower level of adoption than in developed markets. A stablecoin that's a niche product in one country can be a parallel banking system in another.
Monitoring is harder than it looks
The FSB wants surveillance to cover secondary-market depth, liquidity, and structure, plus the geographic distribution of holdings, redemptions, and reserves. That's a tall order. Public blockchains produce abundant transaction data, but pseudonymity and smart-contract routing make it hard to attribute activity to a particular use or geography. Authorities lean on private data compilers whose methods vary in accuracy and transparency. Different methods produce inconsistent datasets, extra noise, and weak comparability.
The technical workload could be substantial for authorities, particularly in emerging markets. The FSB notes this without offering a funding mechanism.
The note stops short of proposing new rules. The next step is implementation of existing FSB recommendations in the jurisdictions that haven't moved yet — and, for now, no deadline has been set.
