The Financial Stability Board (FSB), the global financial watchdog hosted by the Bank for International Settlements, has issued a stark warning in its 2025 annual report. The board highlighted that US dollar-denominated stablecoins circulating across multiple jurisdictions pose "potentially more acute" risks to the financial stability of emerging market and developing economies (EMDEs).
The report details several specific dangers, including currency substitution, reduced use of domestic payment systems, lower effectiveness of domestic monetary policy, strains on fiscal resources, and the circumvention of capital flow measures. The FSB emphasized that while stablecoins can provide benefits, authorities must continue monitoring vulnerabilities related to liquidity, operational risk, and interlinkages with the broader financial system as these connections grow.
Despite market growth, the FSB noted that crypto assets and stablecoins are not widely used in financial services supporting the real economy, such as payments. The report builds on the FSB's 2023 global regulatory framework for crypto asset activities and global stablecoin arrangements. A 2025 review of this framework revealed significant gaps and inconsistencies in its implementation across different jurisdictions.
Looking ahead to 2026, the FSB outlined key focus areas, which include monitoring digital innovation related to crypto assets and continuing to assess stablecoin vulnerabilities. Other priorities include private credit, nonbank financial intermediation, cross-border payments, and regulatory modernization.
