FSB Chair Andrew Bailey Warns of Stablecoin Risks Tied to Cross-Border Supervision and Monitoring Gaps
Key Takeaways
- •FSB Chair Andrew Bailey's October 12, 2026 letter to G20 officials identified sovereign bond market volatility, private credit vulnerabilities, and AI-related threats as key financial stability risks.
- •A 2025 FSB review found that only 11 of 28 surveyed jurisdictions had finalized stablecoin regulatory frameworks, leaving the majority without completed regimes.
- •The FSB warned that large-scale stablecoin redemptions could trigger forced sales of reserve assets and bank deposit withdrawals, spreading stress into bond and banking markets.
- •The FSB called for improved cross-border monitoring, stronger information-sharing between authorities, and implementation of its 2023 stablecoin recommendations on governance, reserve management, redemption, and disclosure.
- •Bailey also cautioned that AI advances could heighten cyber threats to financial institutions, with the FSB finalizing responsible AI guidance and planning continued work on the topic in 2027.
In a letter published on October 12, 2026, Financial Stability Board (FSB) Chair Andrew Bailey highlighted risks spanning sovereign bond market volatility, vulnerabilities in private credit markets, and emerging threats linked to artificial intelligence.
letter was accompanied by a report examining vulnerabilities in global stablecoin arrangements and the challenges authorities face in monitoring their potential impact on financial stability. Stablecoins are digital tokens typically designed to hold a stable value against reference assets such as sovereign currencies, and they have become an increasing focus of global regulators as their use in payments expands.
According to the FSB, the international body that coordinates financial regulatory standards for the G20, cross-border stablecoin supervision and crisis-management arrangements remain underdeveloped. The FSB does not itself regulate or supervise firms; its standards take effect through national authorities, so incomplete adoption across jurisdictions bears directly on the supervision gaps it describes. Its 2025 review found that only 11 of the 28 jurisdictions surveyed had finalised stablecoin regulatory frameworks, leaving the majority without completed regimes.
The watchdog warned that large-scale stablecoin redemptions could trigger forced sales of reserve assets and withdrawals of bank deposits, transmitting stress into traditional financial markets. Stablecoin reserves are commonly held in liquid instruments such as short-term government debt and bank deposits, a composition that links redemption pressure directly to bond and banking markets. Multi-issuer arrangements could complicate crisis management when redemption demands concentrate on a single issuer while reserves are held across different jurisdictions.
To address these gaps, the FSB called for improved monitoring of cross-border vulnerabilities and stronger information-sharing between authorities, alongside the implementation of its 2023 recommendations on global stablecoin arrangements, which set expectations for issuer governance, reserve management, redemption arrangements and disclosure.
Bailey also highlighted AI-related risks, warning that advances in the technology could increase cyber threats to financial institutions and critical market infrastructure. The FSB has finalised guidance on responsible AI adoption, covering governance, development and deployment, cybersecurity, and third-party service-provider risks.
The letter also introduces reports on public-sector backstop funding, regulatory and supervisory modernisation, and the implementation of G20 financial reforms. The FSB said responsible AI adoption would remain an important part of its work in 2027.
The findings will inform discussions among G20 finance ministers and central bank governors at their meeting in Bangkok on October 15, 2026.
The full letter, addressed to G20 finance ministers and central bank governors, is available here.
