- Andrew Bailey, FSB Chair and Bank of England Governor, called on the G20 to harden and accelerate global policy on non-bank finance and stablecoins.
- The FSB will retool surveillance to address risks faster, prioritising the rapidly growing role of stablecoins in payments and settlement, which some predict could exceed US$2 trillion by 2028.
- Bailey warned that many jurisdictions have not finalised frameworks for global stablecoins, creating regulatory arbitrage gaps that allow shocks to propagate.
Andrew Bailey, chair of the Financial Stability Board (FSB) and Bank of England Governor, set a clear path to harden and accelerate the global policy response to risks from non-bank finance and the fast-rising use of stablecoins.
In a letter to G20 counterparts ahead of this week’s meetings, Bailey said the FSB will retool surveillance to spot and address vulnerabilities faster, with a mandate to react at pace, Bloomberg reported.
Priority one is stablecoins’ growing role in payments and settlement. Particularly, issuance and usage have climbed rapidly, particularly in the United States. For instance, Standard Chartered predicts the market could swell to over US$2 trillion (AU$3.02 trillion) by 2028. For its part, Citi believes stablecoins could power a tenth of the global post-trade market within five years.
Back in September, the stablecoin market hit a record US$280 billion in capitalisation, and by the end of this year, McKinsey analysts believe it could very well surpass US$400 billion (AU$609 billion).
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The Need For Clear Regulation
Bailey flagged unfinished business, stating that many jurisdictions have yet to finalise frameworks for global stablecoin arrangements. This, says Bailey, allows gaps to be used in regulatory arbitrage, where activity migrates to looser regimes and weak links propagate shocks.
Europe’s top systemic-risk watchdog is moving to prohibit jointly issued stablecoins across the bloc and outside jurisdictions, a preemptive step to limit cross-border complexity and leakage.
The report highlights that the FSB has struggled to gather data on risks from emerging markets like stablecoins, mostly because we can basically see them everywhere: hedge fund leverage in government bond markets, liquidity mismatches in investment funds, private credit, and more.
In other words, even as new markets and instruments emerge, the EU is tightening its guardrails.
Bailey referenced the Basel Endgame package—agreed nearly eight years ago—which still faces delays. He noted that over the past 15 years, jurisdictions have failed to deliver full, timely, and consistent implementation of common standards.
Bailey’s comments echo the frustration expressed by many sectors across Europe. Pierre Gramegna, who heads the ESM, is urging Brussels to move faster and help local issuers roll out euro-backed digital assets — before U.S. stablecoins leave Europe in the dust.
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