FSB 2024 Report Flags Stablecoin Risks to Emerging Markets

FSB Sees Growing Stablecoin Risks Despite Limited Crypto Market Impact

The Financial Stability Board (FSB), the G20's advisory body on financial stability, has flagged escalating risks associated with stablecoins in its 2025 annual report. The warning comes even as the organization acknowledged that the broader crypto market's direct impact on global finance remained limited throughout the year.

"📢 We have just published our Annual Report, looking at key challenges and achievements in 2025, presented in a fresh, new format. Take a look" — The FSB (@FinStbBoard), original post

According to the FSB, crypto assets exhibited significant volatility during 2025. While interconnections between crypto and traditional financial markets continued to strengthen, the overall impact on global finance remained modest. At the same time, stablecoin market capitalization and transaction volumes grew substantially. Yet their real-world use — particularly in payments — stayed negligible, with stablecoins accounting for no more than 0.02% of actual payment flows.

Why This Matters

The FSB serves as the primary international body shaping financial stability standards for the world's largest economies. Its assessments directly inform national regulatory decisions. By raising alarms about stablecoin risks, the FSB is effectively laying the groundwork for potentially tighter global oversight — a development that could reshape the landscape for major stablecoin issuers and the entire stable-asset infrastructure.

Core Vulnerabilities Identified

Despite the potential benefits stablecoins offer, the FSB outlined several risk categories demanding ongoing surveillance:

• Liquidity risks and questions about reserve adequacy;
• Operational vulnerabilities in underlying infrastructure;
• Deepening entanglement with traditional financial systems.

Global stablecoins — those operating across multiple jurisdictions simultaneously — drew particular scrutiny. Managing reserves across different countries introduces additional complexities and can amplify systemic risk.

Emerging Economies Under Pressure

A dedicated section of the report addresses the impact of foreign-currency-denominated stablecoins on developing nations. The FSB listed several potential consequences:

• Displacement of national currencies and domestic payment systems;
• Reduced effectiveness of central bank monetary policy;
• Strain on fiscal resources;
• Circumvention of capital flow controls.

In essence, the FSB is describing a scenario of spontaneous dollarization through digital channels — a process capable of undermining the monetary sovereignty of entire nations.

Regulatory Gaps and Data Deficiencies

The FSB highlighted significant inconsistencies and gaps in how different countries regulate crypto assets and stablecoins. A 2025 review of international standards implementation revealed that while many jurisdictions have made progress on crypto regulation broadly, only a handful have completed frameworks specifically addressing global stablecoins.

This uneven regulatory landscape creates opportunities for regulatory arbitrage, where issuers and operators gravitate toward jurisdictions with the least oversight. Cross-border coordination mechanisms between regulators remain fragmented and insufficient.

Compounding these challenges is a persistent shortage of reliable crypto market data. Dependence on commercial data providers and fragmented information sources makes comprehensive risk assessment difficult.

Earlier in March, the SEC removed stablecoins from its securities classification under an updated token taxonomy — a move that stands in contrast to the more cautious stance adopted by international financial regulators like the FSB.