The G20-backed watchdog said in a Thursday report that most countries have failed to build cohesive frameworks capable of addressing the global nature of the digital asset industry, even as market capitalization has nearly doubled over the past year.

The FSB, formed after the 2008 financial crisis to monitor systemic threats, admitted that while progress has been made since its 2023 guidance, crypto oversight remains a “patchwork” of partial laws and uncoordinated enforcement. Secretary General John Schindler told reporters that crypto assets “don’t respect borders,” warning that the ease with which digital tokens move across jurisdictions could undermine financial stability if left unchecked.

Stablecoins Under Scrutiny

Among the report’s main concerns were stablecoins, which have surged almost 75% over the past year to roughly $290 billion in circulation. The FSB noted that only a handful of countries – including the United States, following the passage of the GENIUS Act – have implemented clear rules for dollar-pegged tokens. The rest are lagging far behind, raising fears that regulatory blind spots could be exploited as adoption widens.

The watchdog reviewed 29 major jurisdictions including the EU, UK, Hong Kong, and the U.S., concluding that coordination remains too limited to manage potential spillovers. Schindler said the issue isn’t simply about drafting laws but ensuring governments cooperate, warning that “without shared enforcement, national frameworks become meaningless.”

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Mounting Risks After Market Turbulence

The FSB’s call comes just a week after the crypto market suffered its largest crash on record, wiping nearly $20 billion in value within hours. While the Board still considers risks to global stability “contained,” it acknowledged that rising institutional exposure and political support – particularly under President Donald Trump’s pro-crypto policies – could amplify contagion if oversight fails to keep pace.

To prevent future crises, the FSB issued eight new recommendations urging governments to harmonize standards, strengthen cross-border surveillance, and close enforcement gaps that allow offshore entities to evade scrutiny.

The Bigger Picture

Global regulators have been forced to rethink their stance since the high-profile collapses of FTX and TerraUSD/Luna in 2022. Yet, despite multiple warnings, national efforts continue to move at vastly different speeds. As one European regulator put it earlier this year, “even small markets can trigger global consequences when digital assets are involved.”

Unless coordination improves, the FSB warned, the next meltdown might not stay contained within crypto – it could ripple through the broader financial system.

Source: Reuters

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