The Financial Stability Board has warned G20 policymakers about the risks posed by cross-border stablecoins and AI-driven cybersecurity threats. FSB Chair Andrew Bailey urged support for stronger safeguards in a letter ahead of the G20 finance ministers' meeting.
The FSB's warnings to the G20 signal potential regulatory action on stablecoins and AI in finance, which could impact the development and adoption of these technologies and their integration into traditional markets.
The Financial Stability Board (FSB), a global financial watchdog, has highlighted significant risks posed by cross-border stablecoins and artificial intelligence (AI) to financial stability. In a letter published Monday, FSB Chair Andrew Bailey expressed concern that mechanisms for overseeing stablecoins and managing crises across borders are still underdeveloped. His review found that only 11 out of 28 surveyed jurisdictions have completed their stablecoin regulatory frameworks.
Bailey also urged members of the Group of Twenty (G20) to endorse the FSB’s newly established practices for the responsible adoption of AI within the financial sector. He emphasized that AI requires continuous attention and careful management by financial institutions due to its potential to amplify cybersecurity threats and undermine critical financial infrastructure.
The FSB's report accompanying the letter warned that runs on stablecoins could destabilize traditional markets through the forced sale of reserve assets and withdrawals from banks. It also pointed to risks associated with multi-issuer stablecoins, where redemption pressures could disproportionately affect a single issuer even if reserves are held internationally. These concerns echo previous warnings from European Central Bank President Christine Lagarde regarding similar redemption risks for stablecoins operating within and outside the EU.
The FSB’s AI guidelines address governance, development, deployment, cybersecurity, and third-party risks. The watchdog noted that advanced AI could enable sophisticated cyber threats, potentially compromising the resilience of key financial institutions and market infrastructure. The FSB had previously proposed 12 practices for responsible AI adoption in June.
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