While being enthusiastically promoted by cryptocurrency advocates and gaining momentum statistically and anecdotally, stablecoins are still awaiting the verdict of the marketplace. But on the level of international financial regulation and the legitimacy it confers, they may have crossed a Rubicon.
Policymakers are taking a closer look at digital assets’ – and particularly at stablecoins’ – market impact and financial-stability implications. The G20 finance ministers and central bank governors made some judgments at their recent summit.
“We recognize the transformative role that digital financial innovation, including digital assets, can play in supporting broad-based economic growth and the key role of the private sector in driving this innovation,” said paragraph 16 of the summit’s closing Chair’s Statement. The Asheville, North Carolina, meeting’s host, U.S. Treasury Secretary Scott Bessent, may have helped to set a pro-crypto tone compatible with administration positions.
“We also recognize the importance of safeguarding financial stability and maintaining trust in the monetary and payment system in the face of this transformation,” the September 1 statement continued. “We commit to advancing responsible and effective regulatory and supervisory frameworks that preserve financial stability, support economic growth, and establish clear pathways for sound digital financial and digital assets innovation, while considering cross-border opportunities and challenges as appropriate.”
The finance leaders were looking forward to receiving findings from the Financial Stability Board (FSB) on “cross-border implications related to global stablecoin arrangements and stablecoin data sources, availability, and potential challenges.”
Andrew Bailey
Andrew Bailey, the Bank of England governor and chair of the FSB (which is hosted by the Bank for International Settlements in Basel, Switzerland), is one of a number of central bankers who have been skeptical of stablecoins. However, he focused his letter to the G20 finance summit on “the potential impact of frontier AI on cyber risk.”
The summit statement treated AI this way: “We welcome the potential for investment in artificial intelligence, computing, and digital infrastructure to increase productivity and enable broad adoption, while recognizing the importance of addressing risks, including potential financial sector and other sector-specific risks, and leveraging AI-enabled innovation to strengthen cyber resilience.”
For years, regulatory bodies acknowledged the innovative potential of digital-asset products without categorizing them as imminent policy or systemic-risk concerns. Typical was a 2022 assessment by the U.S. Financial Stability Oversight Council (FSOC), which identified “regulatory gaps” but framed vulnerabilities in terms of “interconnections with the traditional financial system” that were “relatively limited.”
In its 2024 annual report, the FSOC, which consists of senior financial regulators and is chaired by the Treasury secretary, saw stablecoins as “a potential risk to financial stability because they are acutely vulnerable to runs absent appropriate risk management standards.” Failure of a dominant firm – Tether’s dollar-pegged USDT then accounted for 70% of total stablecoin market capitalization – “could disrupt the crypto-asset market and create knock-on effects for the traditional financial system,” the council cautioned.
Today, stablecoins’ market cap is just over $300 billion; USDT’s share is about 60%, followed by Circle USDC’s 24%. Those figures are but fractions of the $1.5 trillion of bitcoin, the highest-profile virtual asset. (The ether cryptocurrency’s market cap is nearly equal to the stablecoins total.) None of these values approach, say, the total assets of U.S. insured depository institutions ($26.5 trillion as of June) or global equity market capitalization ($158 trillion in 2025).
Stablecoin market cap rose in August, for the first time in three months, by 1.19%, to $311 billion, according to CoinDesk Data.
The G20 summit’s receptivity coincides with a spate of private-sector initiatives – including a 21-bank international consortium, another group in Japan, Qivalis in Europe, and a Coinbase-Moov offering for U.S. community banks and credit unions.
Also, in the background, U.S legislation – the 2025 GENIUS Act and the stalled CLARITY Act – has raised market expectations, Paul Samson and Luna Gao of Canada’s Centre for International Governance Innovation wrote in Stablecoins and the Race for Digital Money. Stablecoins are “becoming large enough to be relevant for sovereign debt markets,” they said, as issuers hold short-term U.S. government securities as reserves. “High use of USD stablecoins could increase digital dollarization in smaller economies, weaken monetary-policy autonomy, and make domestic payment systems more dependent on foreign-regulated infrastructure,” said Samson and Gao.
A July 2025 Bank for International Settlements bulletin pointed to growing market cap, “linkages with the traditional financial system,” potential spillovers, and associated “policy challenges ranging from preserving financial integrity to mitigating financial stability risks.” The authors stressed “same risks, same regulation” principles and “the need for tailored regulatory approaches that address the nature and specific features of stablecoins.”
This June, the BIS devoted part of its Annual Economic Report to “Anchoring trust in money: innovation beyond stablecoins.”
“Stablecoins display some of tokenization’s potential to support faster and programmable payments, but current designs fall short on foundational properties of money and threaten financial integrity,” said one of the publication’s key takeaways. “Advancing the future monetary system requires coordinated efforts by policymakers along two main dimensions,” said another: “Tackling weaknesses in current stablecoin arrangements to mitigate risks; and bringing the technological advances of tokenization into the two-tier system [of central bank money and private-sector intermediation] to establish trusted forms of programmable money.”
Addressing risks to financial integrity or those related to runs “calls for robust, internationally coordinated approaches that strengthen safeguards for users and mitigate adverse spillovers arising from stablecoins across markets and jurisdictions.”
“The lack of development of regulatory frameworks” is holding back adoption of stablecoins in international trade, said Juan Marchetti, director of the Trade in Services and Investment division, World Trade Organization, as reported by Cointelegraph. The WTO released a study September 14 “highlighting how [stablecoins] can accelerate cross-border payments and their potential to increase participation in the international trading system, especially for developing economies.”
The Asia-Pacific region, with sizable cross-border trade flows, active regulatory hubs and a culture of payment innovation, accounts for 51.2% of identified stablecoin payment volume, according to CoinDesk research.
BIS General Manager Pablo Hernández de Cos went broad and deep in Pushing the Monetary Frontier, an August 28 speech at the Federal Reserve’s Jackson Hole Economic Symposium.
He discussed three different methods of stablecoin reserve-backing, how they “affect bank funding and, through it, credit provision and financial stability.
“If stablecoin reserves were predominantly held as wholesale bank deposits,” for one, “retail funding would give way to concentrated, more rate‑sensitive wholesale liabilities. This would raise banks’ marginal funding costs and thereby tighten lending conditions.
Pablo Hernández de Cos
“If reserves were mostly held in short-dated government bills, an additional effect might arise as banks sold bills to stablecoin issuers, reducing their high-quality liquid assets. If reserves, by comparison, were kept to a large extent at the central bank, the expansion of stablecoins would drain central bank reserves from the banking sector.
"In each case, banks’ liquidity metrics would be likely to initially weaken. Over time, banks would respond by repricing loans and tilting their balance sheets towards more liquid assets. The impact would probably be uneven. Distributional effects could weigh more on smaller banks, creating headwinds for lending to small businesses.”
Hernández de Cos described “two channels pull[ing] in opposite directions: a bank lending headwind and a fiscal space tailwind. The former tightens credit as marginal funding costs rise; the latter reflects additional demand for short-dated bills that lowers short-term yields and expands fiscal space.”
He added, “The origin of stablecoin demand warrants attention. If stablecoin demand arises domestically, issuers’ purchases of short-dated government bills will largely replace domestic investors as holders, so the net effects on short-term yields are likely to be modest. By contrast, if demand comes from abroad, it will add to net demand for short-dated bills, pushing short-term yields lower and expanding fiscal space.”
Presenting another macro perspective at the Jackson Hole, Wyoming, gathering, International Monetary Fund Managing Director Kristalina Georgieva explored the possibility that “tokenization and stablecoins – on their own merit and by stoking competition – will ‘fluidify’ global finance, with stablecoins in particular showing potential to make large-value cross-border payments cheaper and faster.”
One certainty of fluidity in the financial system, in Georgieva’s view, is that “the transmission of risks is faster and the penalty on policy error is larger. Sound regulatory and macro policies become even more important.”
She summarized her three arguments:
-- “Tokenization and stablecoins call for an internationally coordinated regulatory policy response, a heavy lift given geopolitical fragmentation.
-- “Stablecoins could make life more complicated for many emerging-market and developing countries, calling for larger foreign exchange buffers and strict policy discipline.
-- “While stablecoins may lower funding costs for a few countries, they will not obviate fiscal heavy lifting – needed also to relieve pressure on central banks as they focus on price stability.”
Kristalina Georgieva
The core challenge for financial regulation “is to keep up with financial innovation and prevent problems while also allowing positive change and fair competition to flourish,” Georgieva asserted. “New risks call for nimble responses. With tokenization automating margin calls and back-office functions, operational risks transform and reaction times shrink.
“And as stablecoins are marketed as the blockchain equivalent of cash, trust is key: trust in redeemability at par in all states of the world. This calls for strict rules on reserve pools to ensure safety and liquidity, ideally harmonized internationally to support a single, recognizable asset class.
“Ensuring a level playing field will also be important, requiring similar norms for similar financial instruments to guarantee fair competition and limit incentives for regulatory arbitrage.”
Jai Massari, Stanford Law School lecturer and of counsel, Arktouros, observed in an Atlantic Council commentary that “regulatory progress has outpaced international coordination,” as U.S. and EU rules “and the growing number of stablecoin regulations worldwide remain fragmented, leaving issuers and users without a coherent framework for cross-border transactions. The G20’s limited progress toward its own cross-border payment targets underscores the coordination gap.”
Jai Massari
Under the heading “Building the scaffolding for stablecoin cross-border payments,” Massari said, “The G20 can help prevent further fragmentation and close gaps in stablecoin regulation [by building] on its existing work on global stablecoin arrangements to develop principles for regulatory equivalence, the use of stablecoins for payments, collateral, and settlement, and economic fungibility.
“Industry should do its part by developing workable standards for interoperability. Common approaches to reserve composition and reporting, coordinated resolution planning, and inter-affiliate reserve mechanics can help align regulation across jurisdictions.”
In an August 20 Atlantic Council Econographics post, Ruth Goodwin-Groen of the council’s GeoEconomics Center and Louis de Koker, a professor of law at La Trobe University in Australia, revisited the G20’s 2020 Roadmap for Enhancing Cross-Border Payments. Reaffirmed at the Asheville summit, the roadmap aimed “to make payments ‘faster, cheaper, and more transparent and inclusive,’ while ‘maintaining their safety and security.’
“For four of these five goals, the G20 has set global quantitative targets, covering wholesale, retail, and remittance payments, but the ‘safety and security’ goal does not have targets.”
Goodwin-Groen and de Koker noted that “the G20 goals were formulated before the rise of AI-supported fraud and scams, which are increasingly exploiting the speed of payments.” They suggested using the Financial Action Task Force (FATF) revised Travel Rule (2025) as a “test case” for the tradeoffs across the roadmap’s several goals.
The September 1 summit statement’s 17th and final paragraph expressed support for the FATF and “FATF-Style Regional Bodies in overseeing the implementation of the FATF Standards to combat money laundering, terrorism financing, and proliferation financing,” in line with an April 2026 ministerial declaration, as well as for “countries to implement risk-based supervision for anti-money laundering and countering the financing of terrorism and proliferation financing of weapons of mass destruction.”