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FSB says dollar stablecoins strain emerging economies

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FSB says dollar stablecoins strain emerging economies

The Financial Stability Board has raised fresh concerns about the spread of foreign currency stablecoins in emerging markets. 

Summary

  • FSB said dollar stablecoins can weaken payments, monetary policy, and capital controls across emerging markets.
  • Regulators still face gaps in applying the FSB’s global framework for crypto and stablecoin oversight.
  • The FSB said stablecoins still show limited use in real economy payments despite market growth.

In its 2025 annual report, the global watchdog said US dollar stablecoins used across borders can create financial and policy risks for developing economies.

Meanwhile, the FSB said foreign currency-denominated stablecoins can create pressure for emerging market and developing economies. It stated that US dollar stablecoins moving across several jurisdictions may carry “potentially more acute” risks for those markets.

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According to the report, these risks include currency substitution and weaker use of local payment systems. The board also said they can reduce the effectiveness of domestic monetary policy and create pressure on fiscal resources.

The FSB said regulators still need to track how the stablecoin sector develops. It noted that authorities must understand risks tied to liquidity, operational issues, and links with the wider financial system.

The report also referred to the FSB’s 2023 global framework for crypto asset activity and stablecoin arrangements. After reviewing that framework in 2025, the board said there are still clear gaps and inconsistencies in how it is being applied across jurisdictions.

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Moreover, the board said crypto assets and stablecoins still have limited use in real economic activity, including payments. It stated,

“Despite growth in these markets in recent years, crypto-assets and stablecoins are not widely used in financial services supporting the real economy.”

At the same time, the FSB said stablecoins may offer some benefits. Still, it added that regulators should keep watching vulnerabilities as connections with core financial markets and institutions continue to grow.

FSB sets focus areas for 2026

The report said the board will continue to monitor digital innovation linked to crypto assets in 2026. Stablecoin-related risks remain part of that work, especially in areas tied to market structure and financial resilience.

The FSB also listed other priorities for the coming year. These include private credit, nonbank financial intermediation, cross-border payments, crisis preparedness, and further work on regulatory modernization.

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Crypto World

Stablecoins Do Not Threaten Banking Just Yet: Analyst

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Stablecoins Do Not Threaten Banking Just Yet: Analyst

The impact of stablecoins on the banking sector appears “limited” at the current phase of the adoption cycle, but banks could face increasing competition and an erosion of market share as the stablecoin sector and tokenized real-world assets (RWAs) grow in market capitalization. 

“So far, the use of stablecoins remains limited, but their market capitalization exceeded $300 billion at the end of last year,” Abhi Srivastava, associate vice president of Moody’s Investors Service Digital Economy Group, told Cointelegraph.

The stablecoin market cap has surged past $300 billion. Source: RWA.xyz

The role of stablecoins in payments, cross-border commerce and onchain finance is “expanding,” despite their currently limited role, Srivastava said, adding that existing payment systems in the US are already “fast, low-cost and trusted.” He said:

“For the banking sector, at this stage, disruption risk appears limited. In the near term, US rules that prohibit stablecoins from paying yield mean they are unlikely to replace traditional deposits at scale domestically.”

However, over time, growing adoption of stablecoins and tokenized RWAs, traditional or physical financial assets represented on a blockchain by a token, could place “pressure” on the banking sector, leading to deposit outflows and reduced lending capacity, he said.

Stablecoin regulatory policy has become a hot-button issue among crypto industry executives and those in the banking sector, with fears that yield-bearing stablecoins could erode banking market share proving to be a stumbling block for the CLARITY crypto market structure bill in Congress. 

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Related: Stablecoins behave like FX markets as liquidity splits: Eco CEO

CLARITY Act stalled, as banks fight yield-bearing stablecoins

The Digital Asset Market Clarity Act of 2025, also known as the CLARITY Act, is a comprehensive crypto market regulatory framework that establishes an asset taxonomy, regulatory jurisdiction and oversight over the crypto markets.

The CLARITY crypto market structure bill. Source: US Congress

It is now stalled in Congress after a group of crypto industry companies, led by cryptocurrency exchange Coinbase, publicly stated opposition to earlier drafts of the bill.

A lack of legal protections for open-source software developers and a prohibition on yield-bearing stablecoins were among some of the most contentious issues cited by crypto industry opponents of the legislation.

Several attempts have been made by US lawmakers and the White House to negotiate a bill acceptable to both the crypto industry and the bank lobby.

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Earlier this month, North Carolina Senator Thom Tillis said he plans to release an updated draft bill proposal that would be acceptable to both sides; however, the bill has reportedly received pushback, according to Politico, and has yet to be publicly released. 

However, other crypto industry executives and market analysts have warned that if the CLARITY Act fails to pass, it could open the crypto industry up to future regulatory crackdowns by hostile lawmakers and officials.

Magazine: Stablecoins will see explosive growth in 2025 as world embraces asset class