The Financial Stability Board, a global financial watchdog operating under the Bank for International Settlements, has cautioned that stablecoins denominated in foreign currencies carry significant financial stability and macroeconomic risks for emerging market and developing economies. The warning appeared in the FSB’s annual report for 2025, published on Tuesday. The board singled out US dollar-denominated stablecoins operating across multiple jurisdictions as presenting risks that are potentially more severe for these economies than for advanced ones.
According to the report, the risks associated with such stablecoins include currency substitution, a reduced reliance on domestic payment systems, and diminished effectiveness of local monetary policy. Authorities in affected countries could also face strains on fiscal resources and the circumvention of capital flow controls. The FSB stressed that these vulnerabilities require ongoing attention from policymakers as the stablecoin sector continues to evolve.
The FSB said lawmakers must assess how the stablecoin industry develops in order to understand and respond to risks tied to liquidity, operational stability, and connections with the broader financial system. The board noted that stablecoins can offer certain benefits, but maintained that monitoring must continue as linkages with core financial markets and institutions deepen. The report did not specify which jurisdictions face the most immediate exposure.
The 2025 report builds on a global regulatory framework the FSB established in 2023 covering crypto asset activities and global stablecoin arrangements. A review conducted in 2025 found that implementation of that framework still shows significant gaps and inconsistencies. The FSB indicated that closing those gaps remains a priority as the sector matures.
Despite growing attention to the sector, the FSB noted that crypto assets and stablecoins still lack meaningful adoption in real economic use cases such as everyday payments. The board acknowledged the potential utility of these instruments while emphasizing that vulnerabilities tied to interlinkages, liquidity, and operational risks must remain under close watch. This cautious stance reflects the FSB’s broader mandate to safeguard global financial stability.
Looking ahead to 2026, the FSB outlined several key areas of focus, including digital innovation related to crypto assets and continued monitoring of stablecoin vulnerabilities. Additional priorities include tracking risks in private credit markets, nonbank financial intermediation, and cross-border payments. The board also flagged the implementation of further measures related to crisis preparedness and regulatory modernization as areas requiring attention in the coming year.
The FSB was established in April 2009 as a successor to the Financial Stability Forum, created by G20 economies in the aftermath of the 2008 financial crisis to strengthen global financial systems. Its annual reports serve as a key reference point for regulators and policymakers worldwide. The 2025 edition reflects the board’s increasing focus on digital assets as a potential source of systemic risk.
Originally reported by CoinTelegraph.
