The Financial Stability Board (FSB), an international watchdog that monitors the global financial system and issues regulatory recommendations to its member jurisdictions, has outlined financial stability risks associated with artificial intelligence (AI) and regulatory concerns surrounding stablecoins in a letter to the Group of Twenty (G20), the forum that brings together the world's major economies to coordinate financial policy and regulatory priorities.

In the letter, published Monday and submitted to G20 finance ministers and central bank governors ahead of their Thursday meeting, FSB Chair Andrew Bailey warned that cross-border mechanisms for stablecoin oversight and crisis management “remain immature or are not yet developed.”

Citing the watchdog's 2025 review, Bailey noted that 11 of 28 surveyed jurisdictions had finalized stablecoin regulatory frameworks, leaving the majority of those surveyed without finalized rules. He also urged G20 members to support the FSB's newly finalized practices for responsible AI adoption in the financial sector — guidance that, like the FSB's other recommendations, is not legally binding and relies on national authorities for implementation.

“AI therefore requires our continued close attention alongside careful management by financial institutions,” Bailey wrote.

Stablecoin risks extend to traditional financial markets

In a report accompanying the letter, the FSB warned that stablecoin runs could spill into traditional markets through forced sales of reserve assets and withdrawals of bank deposits. The watchdog also identified risks for multi-issuer stablecoins, where redemption demand could concentrate on one issuer while reserves are held in different jurisdictions.

These concerns echo what regulators have previously raised. In 2025, European Central Bank (ECB) President Christine Lagarde warned of similar redemption risks involving stablecoins issued inside and outside of the European Union.

AI safeguards target cybersecurity and third-party risks

The FSB's AI practices cover organization-wide governance, AI development and deployment, cybersecurity, and third-party service risks. Bailey also warned that sophisticated cyber threats enabled by AI could undermine the resilience of critical financial institutions and market infrastructure.

The risks have similarly drawn regulatory attention. In July, European central bankers warned that advances in AI could amplify market volatility and cybersecurity threats. In June, the FSB proposed 12 practices for responsible AI adoption, before finalizing its guidance for the upcoming G20 meeting. Attention now turns to Thursday's meeting of G20 finance ministers and central bank governors, where the FSB's warnings and finalized AI practices will be up for consideration.