FSB Issues Warning on Stablecoin Risks Before G20 Summit

FSB Issues Warning on Stablecoin Risks Before G20 Summit

Renewed Concerns Over Stablecoin Risks

The Financial Stability Board (FSB) has issued a renewed warning regarding the risks associated with stablecoins, just days ahead of the upcoming G20 summit. In a letter addressed to G20 finance ministers and central bank governors, FSB Chair and Bank of England Governor Andrew Bailey emphasized the urgent need to evaluate the expanding role of stablecoins in global payments and settlement systems. Bailey expressed concern that the rapid proliferation of these digital assets—typically pegged to fiat currencies—could undermine monetary trust, disrupt traditional credit creation, and complicate financial oversight.

Bailey highlighted that the risks and broader impacts of stablecoins remain insufficiently understood, largely due to the fast-evolving nature of the market. He called for the continued implementation of regulatory recommendations, enhanced monitoring mechanisms, and stronger cross-border cooperation to address emerging challenges. This focus on stablecoins builds on the FSB’s earlier initiatives, including the 2021 global framework designed to monitor their use.

International Alarm and Regulatory Challenges

The FSB’s warning arrives amid growing international apprehension. The Bank for International Settlements (BIS) recently cautioned that without robust regulatory frameworks, stablecoins could pose significant threats to financial stability and monetary sovereignty. Similarly, Amundi, Europe’s largest asset manager, expressed concerns that the U.S. GENIUS Act—legislation recently enacted to integrate stablecoins into the mainstream financial system—might destabilize global payment flows by altering traditional money movement patterns.

Bailey has been particularly vocal about the systemic risks posed by private stablecoin issuance, especially when conducted by commercial banks. He argued that such instruments could erode established credit mechanisms and weaken central banks’ ability to control monetary policy. As an alternative, Bailey advocated for the digitization of bank deposits, which he views as a safer and more regulated option that preserves central bank oversight.

The FSB also drew attention to the increasing adoption of stablecoins in emerging markets, where they are often used as substitutes for volatile local currencies and inefficient banking infrastructures. In response, the FSB plans to deepen its analysis of stablecoin-related risks within these economies.

Market Dynamics and the Need for Vigilance

Meanwhile, major stablecoin issuers such as Circle continue to mint billions of dollars’ worth of tokens, gaining significant traction on Wall Street. The U.S. President’s endorsement of cryptocurrency and the GENIUS Act has sparked controversy, with critics warning of potential foreign influence and systemic vulnerabilities.

Bailey’s letter underscored recent episodes of market volatility as a stark reminder of the financial system’s fragility, particularly outside traditional banking channels. He stressed the necessity for robust surveillance and regulatory coordination, especially as non-bank financial intermediation and emerging technologies like stablecoins reshape the financial landscape.

A central concern is the potential erosion of the “singleness of money”—the unified trust in currency that underpins economic stability. Bailey warned that if stablecoins circulate outside regulated systems, they could create parallel forms of money, complicating monetary policy implementation and cross-border payment processes.

As the global stablecoin market continues to expand, the FSB’s efforts to monitor and regulate these digital assets are increasingly viewed as essential to maintaining financial stability and safeguarding consumers and investors worldwide.