FSB Urges Fixing Crypto Regulation Gaps as Stablecoin Risks Rise

The Financial Stability Board (FSB) said in its 2025 Annual Report that gaps and inconsistencies in crypto regulation and stablecoin rules could threaten financial stability and slow the growth of a resilient digital asset ecosystem. FSB Chair Andrew Bailey noted that expanding digital assets and advances in artificial intelligence (AI) are reshaping finance, but “financial stability” remains a prerequisite for sustainable growth. While crypto-asset markets saw significant volatility in 2025, the FSB assessed that impacts on the wider financial system stayed limited because crypto and stablecoins are not yet widely used in payments for the real economy, and DeFi remains small. Key finding: implementation is uneven. In a thematic peer review of the FSB’s 2023 “Global Regulatory Framework for Crypto-Assets and Stablecoins” across 37 jurisdictions, the FSB found that some progress has been made, but many countries have not acted. The report warned that fragmented crypto regulation creates opportunities for regulatory arbitrage and complicates oversight. Regulatory contrast highlighted the risk profile: the EU’s MiCA framework fully took effect in 2025 (licensing, disclosure, and reporting for crypto and stablecoins). The UK and US are still working on market-structure rules; India reportedly lacks notable progress; and China essentially bans the sector. Stablecoins are the main focus for tighter scrutiny. The FSB cited a stablecoin market cap above $300B as of Dec 2025 and a forecast of $1.9T by the end of the decade. It flagged vulnerabilities tied to liquidity, operational risk, and cross-border reserve management, including risks for emerging markets from foreign-currency-denominated stablecoins. Going forward, the FSB will monitor digital-asset developments and examine stablecoin vulnerabilities, and it will also look at how AI-related risks (cyber risk, model risk, and third-party dependencies) could amplify financial-sector vulnerabilities.