FSB warns of stablecoin risks for emerging economies

The FSB warns that US dollar stablecoins pose major risks to emerging economies, such as currency substitution and financial instability, and calls for stronger global regulation.

The Financial Stability Board (FSB), in its 2025 annual report, has issued strong warnings about the risks linked to the rising use of US dollar-denominated stablecoins in emerging and developing economies. The FSB highlights that cross-border use of these stablecoins can lead to currency substitution, weaken domestic payment systems, and undermine the effectiveness of local monetary policy. Additional concerns include threats to financial transparency, increased risk of illicit activities, data protection and cybersecurity vulnerabilities, and challenges to consumer and investor protection. The FSB stresses that these risks are particularly acute for economies with limited resources and institutional capacity. The report also points out gaps and inconsistencies in the global regulatory framework for stablecoins, urging coordinated international oversight. While stablecoin transaction volumes are rising rapidly, the FSB notes their use in real economic activity remains limited, but warns that unchecked growth could heighten macroeconomic and financial stability risks for vulnerable markets.