FSB warns $300 billion stablecoin market faces run risk

The Financial Stability Board warned Oct. 12 that stablecoins could face redemption crises if reserve assets become inaccessible across borders during market stress. The risk applies even when tokens are fully backed by cash, Treasury securities or other assets.

The global financial watchdog identified particular risks for stablecoins issued by affiliated companies in different countries. These companies may share responsibility for one token while holding reserves separately. Holders may be able to redeem tokens through any participating issuer, regardless of where the tokens were issued.

This arrangement can create a liquidity mismatch when redemption requests concentrate in one country while most reserve assets are held elsewhere. Affiliated companies could transfer reserves under normal conditions. Banking restrictions, settlement delays and differences in national rules could slow or block those transfers during a market panic.

Stablecoins trade around the clock and can cross borders within seconds. The assets backing them remain subject to local market hours, banking systems and settlement timelines. If issuers cannot process redemptions promptly, holders may sell tokens on secondary markets at a discount, putting pressure on their dollar pegs.

A large run could affect traditional financial markets if issuers rapidly sell Treasury securities or withdraw large deposits from banks to raise cash. The FSB also found that issuers may have difficulty identifying where tokens are held because blockchain transactions can be pseudonymous. That could make it harder to determine which entity is responsible for a redemption.

FSB Chair Andrew Bailey described international regulatory coordination as underdeveloped. Authorities do not yet have established arrangements for managing the failure of a stablecoin operating across several countries.

Circle’s European USDC arrangements show how cross-border reserve management can affect redemption procedures, although they differ from the model examined by the FSB. Under a policy updated in September, Circle issues USDC through its French entity for the European Economic Area and through its U.S. entity for other markets.

The policy allows Circle France to adjust or defer certain redemption requests during a defined stress event if the two entities cannot rebalance their reserves. It also permits temporary limits on redemptions by European crypto-asset service providers while preserving holders’ ability to redeem at par. The provisions describe contingency arrangements and do not indicate an existing liquidity failure.

The FSB warned that differences in national insolvency laws could create uncertainty over which regulator may intervene and how remaining reserves should be distributed if an issuer becomes distressed. Its 2025 assessment found gaps in countries’ implementation of global stablecoin recommendations, leaving different supervisory standards across jurisdictions.

The FSB is seeking stronger information-sharing arrangements and closer monitoring of where stablecoins circulate, where redemptions occur and where reserves are held. It also wants regulators to assess secondary-market liquidity and coordinate plans for stablecoin distress or insolvency.

The watchdog reported that reliable information remains difficult to obtain. Blockchain analytics companies use different methods to measure stablecoin activity, while identifying holders’ locations and tracking cross-border transactions can be challenging.

Stablecoins were valued at approximately $300 billion in mid-2026, with about 99% of the market linked to the U.S. dollar. The FSB’s findings are due to be presented at the G20 meeting of finance ministers and central bank governors on Oct. 15. Its recommendations are nonbinding, and it has not set a timetable for common procedures covering the failure of a stablecoin issuer across multiple countries.