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The Financial Stability Board warned that the approximately $300 billion stablecoin market could face redemption crises even when issuers hold full reserves. In an Oct. 12 report, the watchdog said cross-border structures may leave issuers unable to meet concentrated withdrawals when reserve assets sit in another jurisdiction. The market was about 99% pegged to the US dollar in mid-2026.
Why it matters
The FSB's concern centers on stablecoins issued by affiliated entities that share liability for one token while keeping separate reserves. Holders may be able to redeem through any participating issuer, creating a liquidity mismatch if withdrawals concentrate in one country while Treasury securities, bank deposits or other collateral remain elsewhere.
That imbalance may be manageable in normal conditions, but banking restrictions, settlement delays and different national rules can obstruct reserve transfers during a panic. Stablecoins trade around the clock and move across borders faster than the traditional assets backing them. Delayed redemptions could push holders to sell at a discount, weakening dollar pegs and forcing issuers to liquidate reserves or withdraw bank deposits quickly.
Market impact
A large run could connect stablecoin stress to traditional finance through rapid sales of reserve assets and deposit withdrawals. The FSB also warned that pseudonymous blockchain activity can make it difficult to identify where tokens are held, where redemptions occur and which affiliated entity carries the obligation.
Circle's USDC arrangements illustrate the operational issue. Circle France and its US entity serve different markets, and its policy includes contingency measures for periods when reserve rebalancing cannot be completed. The FSB is seeking stronger information sharing, cross-border monitoring, secondary-market liquidity assessments and coordinated failure planning. Its recommendations are non-binding, and the Oct. 15 G20 meeting will consider the findings without a common timetable for handling a multijurisdictional issuer failure.
Frequently asked questions
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Why does the FSB see run risk even when stablecoins are fully reserved?
The FSB says reserves may be inaccessible across borders during stress. Banking restrictions, settlement delays and national rules can prevent collateral from reaching the jurisdiction where redemptions concentrate.
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How can cross-border stablecoin structures create a liquidity mismatch?
Affiliated issuers may share liability for one token while holding separate reserves. Withdrawals can concentrate in one country while the backing assets remain elsewhere.
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What could happen if stablecoin redemptions are delayed?
Holders may sell stablecoins at discounts on secondary markets, weakening their dollar pegs. Issuers could also liquidate reserve assets or withdraw substantial bank deposits.
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Why does the FSB link stablecoin stress to traditional finance?
A large run could force issuers to rapidly sell Treasury securities and other reserve assets or withdraw bank deposits, creating spillovers into traditional financial markets.
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What actions is the FSB seeking from regulators?
The FSB wants stronger information sharing, monitoring of token circulation and reserve locations, assessments of secondary-market liquidity, and coordinated plans for stablecoin distress or insolvency.
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