Geostrategic Media Political Commentary, Analysis, Security, Defense
Sana Khan
The Financial Stability Board (FSB), established after the 2008 global financial crisis, has warned that fragmented and inconsistent regulation of cryptocurrencies poses growing risks to the global financial system. The FSB’s latest review covering 29 jurisdictions including the U.S., EU, UK, and Hong Kong found that progress on implementing 2023’s crypto rule recommendations has been slow and uneven.
While the FSB stressed that current risks to global financial stability remain “limited,” it noted that the recent surge in crypto values doubling the total market to around $4 trillion in a year has increased the urgency for coherent global oversight. The group also warned that the cross-border nature of crypto assets allows them to evade national regulations easily.
Why It Matters
The warning comes amid a new wave of crypto enthusiasm, fueled partly by pro-crypto remarks from U.S. President Donald Trump and booming interest in bitcoin and stablecoins. The rapid integration of crypto into traditional financial systems raises the risk of contagion if markets turn volatile again — similar to the 2022 collapses of FTX and TerraUSD.
Stablecoins, in particular, are a focal point of concern. Despite their growing $290 billion market, the FSB found that most countries lack comprehensive regulatory frameworks to govern their issuance, backing, and use. This regulatory gap could become a key vulnerability if stablecoins gain broader adoption in cross-border transactions.
FSB Secretary General John Schindler emphasized the need for greater international cooperation, warning that crypto’s borderless nature undermines isolated national regulations. “These assets can move across borders very easily much more easily than other financial assets,” Schindler said, underscoring the risk of regulatory arbitrage.
The European Union’s securities watchdog echoed similar concerns earlier this year, warning that even small crypto markets could trigger systemic shocks. Meanwhile, the United States while participating only in the stablecoin section of the review has started implementing new rules, reflecting a cautious but growing focus on crypto oversight.
What’s Next
The FSB has outlined eight recommendations urging countries to fast-track adoption of consistent and comprehensive crypto and stablecoin regulations, and to strengthen cross-border information sharing. Global regulators are expected to revisit the issue at upcoming G20 finance meetings, with particular attention to stablecoins and decentralized finance (DeFi) integration.
However, without full participation including from key crypto hubs like El Salvador experts warn that loopholes will persist, leaving space for illicit finance, market manipulation, and unchecked volatility to spill into the broader economy.
