Global watchdog warns the $300 billion stablecoin market could face bank runs even with full reserves

The Financial Stability Board (FSB) warned that stablecoins could face redemption crises if, during market stress, reserves become inaccessible across borders.

In an Oct. 12 report, the global financial watchdog said stablecoin issuers operating through affiliated entities in different countries could struggle to meet concentrated withdrawal demands when their reserve assets are held elsewhere.

The warning comes ahead of an Oct. 15 meeting of G20 finance ministers and central bank governors, as regulators confront growing risks from a stablecoin market valued at approximately $300 billion in mid-2026, with 99% of its value pegged to the US dollar.

FSB Chair Andrew Bailey said international regulatory coordination remains underdeveloped, leaving authorities without mature arrangements for managing cross-border stablecoin failures.

Stablecoin reserves face cross-border stress test

The FSB identified particular vulnerabilities in stablecoins issued by multiple affiliated companies that share liability for the same token while maintaining separate reserves.

Under such arrangements, holders may be able to redeem their tokens through any participating issuer, regardless of where the stablecoins were originally issued.

That flexibility can create liquidity mismatches when redemption demand concentrates in one jurisdiction while much of the collateral backing the tokens remains in another.

Moving reserves between entities could resolve the imbalance under normal conditions. However, banking restrictions, settlement delays and differences in national regulations could complicate those transfers during a market panic.

The speed at which stablecoins circulate amplifies the risks.

Digital tokens can move across borders and trade around the clock, while the Treasury securities, bank deposits and other traditional assets backing them remain subject to local financial-market operating hours and settlement arrangements.

The FSB warned that delays in meeting redemptions could push holders to sell stablecoins at discounts on secondary markets, potentially destabilizing their dollar pegs.

A sufficiently large run could also spill into traditional finance if issuers liquidate reserve assets rapidly or withdraw substantial deposits from banks to meet redemption requests.

For context, Circle's European stablecoin arrangements illustrate how cross-border reserve management can affect redemption procedures.

Under its redemption policy, updated in September, Circle co-issues USDC through its French entity for the European Economic Area and its US entity for markets outside the region.

The policy allows Circle France to adjust or defer certain redemption requests during a defined stress event when the two entities cannot complete reserve rebalancing.

Those measures could include temporary redemption limits for European crypto-asset service providers, while preserving holders' rights to redemption at par.

The provisions describe contingency arrangements rather than an existing liquidity failure. They also operate under Circle's specific jurisdictional redemption rules, which differ from the FSB's unrestricted cross-issuer redemption model.

Nevertheless, the regulator's concerns extend to affiliated issuers' legal responsibilities when a stablecoin faces distress.

The FSB noted that issuers may struggle to identify where their tokens are held because blockchain transactions can be pseudonymous, complicating efforts to determine which entities are responsible for particular redemption obligations.

Differences in national insolvency laws could create additional uncertainty over which regulator has authority to intervene and how remaining reserves should be distributed.

Those challenges are compounded by uneven regulatory development.

The FSB's 2025 assessment found substantial gaps in countries' implementation of its global stablecoin recommendations, increasing opportunities for issuers to structure operations across jurisdictions with different supervisory requirements.

FSB seeks stronger regulatory regime

In response, the watchdog is seeking stronger international information-sharing arrangements and closer monitoring of where stablecoins circulate, where redemptions occur and where reserve assets are held.

It also wants regulators to assess the depth of secondary-market liquidity and develop more coordinated approaches to handling stablecoin distress or insolvency.

However, regulators face significant information gaps. The FSB said blockchain analytics providers often use different methods to estimate stablecoin activity, and reliably establishing holders' geographic locations and cross-border transactions can be hard.

The proposed measures build on the FSB's 2023 recommendations and are non-binding, leaving national authorities responsible for implementing any changes.

At this week's G20 meeting, officials will receive the FSB's findings as part of discussions on financial stability.

The watchdog has identified further work on cross-border monitoring, information sharing and crisis planning, but has not established a timetable for common procedures governing a stablecoin issuer's failure across multiple jurisdictions.