FSB warns stablecoin bank runs could happen even with full reserves

Global watchdog flags cross-border reserve risk for stablecoins

The Financial Stability Board, a global financial watchdog, warned on Oct. 12 that the $300 billion stablecoin market could face redemption crises even when issuers hold enough reserves to cover all tokens. The problem arises when those reserves are spread across different countries and cannot move quickly during a panic.

Stablecoins are digital tokens designed to hold a steady value, usually pegged 1-to-1 to the US dollar. The FSB said that when withdrawal demands concentrate in one country while the backing assets sit in another, issuers may struggle to meet redemptions in time.

The warning comes ahead of a G20 meeting on Oct. 15, where finance ministers and central bank governors will discuss the risks.

How the mismatch happens

Many stablecoin issuers operate through affiliated companies in multiple countries that share liability for the same token but keep separate reserves. Users can often redeem tokens through any participating issuer, no matter where they bought them.

Under normal conditions, moving reserves between entities can balance things out. But during market stress, banking restrictions, settlement delays and different national regulations can block or slow those transfers.

The risk is amplified by the speed of digital tokens. Stablecoins trade around the clock and move across borders instantly, while the traditional assets backing them—such as Treasury securities and bank deposits—are subject to local market hours and slower settlement systems.

What could go wrong

The FSB said delays in honoring redemptions could force holders to sell stablecoins at a discount on secondary markets, potentially breaking the dollar peg. A large enough run could also spill into traditional finance if issuers are forced to rapidly sell reserve assets or pull big deposits from banks.

FSB Chair Andrew Bailey said international regulatory coordination remains underdeveloped, leaving authorities without mature plans for handling cross-border stablecoin failures.

Circle’s USDC as an example

The report pointed to Circle’s European stablecoin setup as a real-world illustration. Circle co-issues USDC through a French entity for the European Economic Area and a US entity for other markets. Its redemption policy, updated in September, allows Circle France to adjust or defer certain redemption requests during a stress event if reserve rebalancing between the two entities cannot be completed.

Those measures describe contingency arrangements rather than an existing liquidity failure and operate under Circle’s specific jurisdictional rules, which differ from the FSB’s broader concern about unrestricted cross-issuer redemption.

Regulatory gaps and next steps

The FSB noted that issuers may have trouble identifying where their tokens are held because blockchain transactions can be pseudonymous. Differences in national insolvency laws add further uncertainty about which regulator has authority and how remaining reserves should be distributed.

The watchdog is calling for stronger international information-sharing, closer monitoring of where stablecoins circulate and where reserves are held, and more coordinated approaches to handling stablecoin distress. However, its proposed measures are non-binding, and a 2025 FSB assessment found substantial gaps in how countries have implemented earlier global stablecoin recommendations.

Key numbers

• Approximately $300 billion in stablecoin market value as of mid-2026
• 99% of stablecoin value is pegged to the US dollar
• G20 finance ministers and central bank governors to discuss risks at an Oct. 15 meeting

What is confirmed

The FSB published a report on Oct. 12 warning about cross-border stablecoin redemption risks. The global financial system’s vulnerability to reserve mismatches is a reported concern, not an observed crisis. Circle’s redemption policy adjustments are confirmed contingency measures, not signs of an active liquidity failure.

What is still unclear

It remains unclear whether any specific stablecoin issuer is currently experiencing the type of cross-border redemption stress the FSB described. The FSB’s recommendations are non-binding, and the extent to which individual countries will act on them is unknown.

Why this matters for crypto users

For people who hold stablecoins, the warning highlights that having “full reserves” on paper does not guarantee you can redeem your tokens quickly if the assets backing them are trapped in another country. It also underscores that the regulatory framework for stablecoins is still evolving and varies significantly across jurisdictions.

Sources

• CryptoSlate