Nobody Knows What Happens When the Crisis Hits: Stablecoin Regulation Enters the Stress-Test Phase

A day before the G20 summit, the FSB told finance ministers that no real-world stress has ever tested the crisis-management machinery for global stablecoins; days later, Singapore’s central bank chief barred stablecoins from wholesale settlement before the legislative window closes. Regulatory focus is shifting from “who can issue” to “what happens when something breaks.”

The FSB’s “Untested” Warning: Invisible Fault Lines in a $300 Billion Market

On October 12, Financial Stability Board (FSB) Chair Andrew Bailey wrote to G20 finance ministers and central bank governors, attaching the report “Global Stablecoin Arrangements: Cross-border vulnerabilities and financial stability monitoring.” The report was commissioned by the US G20 presidency and submitted ahead of the October 15 G20 Finance Ministers meeting. Its core judgment is blunt: global stablecoins and their national regulatory frameworks remain “untested in severe stress and insolvency.”

Market size is the backdrop for weighing this warning. The FSB puts the stablecoin market at roughly $300 billion as of mid-2026, little changed from a year earlier. After nearly tripling between 2021 and 2025, the market has entered a plateau, yet 99% of its value is pegged to the US dollar. That aligns with the IMF’s August estimate. The FSB notes that dollar-linked instruments can produce currency substitution and pressure on domestic financial intermediation in emerging market and developing economies (EMDEs) — when a dollar-denominated stablecoin sells off under stress, the shock is not confined to crypto markets but reaches sovereign bonds and money markets.

The core risk structure named in the report is the “multi-issuer” arrangement, where multiple affiliated entities jointly share liability for a single stablecoin while each holds its own reserves. The report explicitly cites Circle’s USDC and Paxos Global Dollar as examples. In this structure, holders can redeem from any affiliate; once stress appears, redemption demand can concentrate on a single entity, while reserves scattered across jurisdictions make cross-border rebalancing prone to friction or outright failure. More vexing, issuers have almost no visibility into their own liability structure — who holds the tokens, or which country a redemption request will come from — because tokens trade 24/7 on pseudonymous public chains, while reserve assets and legal protections are anchored in specific jurisdictions and market operating hours.

The regulatory map still has large blank spaces. An FSB 2025 survey found that only 11 of 28 jurisdictions surveyed had completed stablecoin regulatory frameworks. The data foundation is equally thin: authorities rely on private data compilers whose coverage, transparency and methodologies differ, making it hard to accurately map holder geography and fund flows. The report lays out follow-up work: develop a set of metrics for financial stability monitoring and identify data gaps; better leverage existing data by encouraging cross-border analytical expertise, information sharing and coordination; and explore industry best practices for on- and off-chain data collection and compilation. The FSB proposes no crisis-resolution scheme of its own, and its recommendations carry no binding force — it reads more like a declaration that “we are not ready,” handing the hard questions to national regulators.

MAS’s Settlement Hierarchy: Stablecoins Pinned Outside Wholesale Settlement

Around the same time, one of Asia’s most cautious financial centres offered a more concrete answer. On October 9, Monetary Authority of Singapore (MAS) Managing Director Chia Der Jiun delivered a keynote at the INSEAD Digital Finance & Agentic AI Summit with unusually direct wording: stablecoins cannot be assumed to hold their par value and may be unsuitable for settling large wholesale transactions. He contrasted bank deposits with stablecoins — deposits maintain parity because they can be exchanged at par for central bank reserve money, “but this is not a given for stablecoins.”

Chia drew a clear settlement hierarchy: central bank money at the top, deposit tokens second, stablecoins at the bottom. Deposit tokens are expected to gain acceptance in banking use cases such as cash management, while stablecoins “may find wider adoption on crypto exchanges and in fintech payments,” and as private digital money scales, “CBDCs will ultimately be needed to anchor monetary stability.” He then raised a pivotal policy question: if some stablecoins become systemically important, would additional regulatory requirements — or even central bank reserve access — be needed? He did not say whether MAS supports reserve access.

The weight of these remarks lies in their timing: MAS is in the process of writing stablecoins into law. Its consultation on amendments to the Payment Services Act (reference P015-2026), published September 1 and closing October 16, would elevate the single-currency stablecoin framework to statutory status: licensed issuers must hold reserve assets at least equal to the par value of coins in circulation, redeem at par, and undergo stress tests at least quarterly (covering heavy redemption requests, difficulty liquidating reserves and settlement outages); interest payments to holders are banned; recovery and orderly wind-down plans must be shared with MAS; and issuers must technically be able to trace, freeze or destroy tokens linked to illicit activity. The amendments also propose letting MAS recognise a limited number of foreign stablecoins from equivalent regimes and exempt some multi-jurisdictional issuance arrangements from local incorporation and reserve requirements.

MAS is simultaneously building its own central-bank money layer. A wholesale Singapore-dollar CBDC has been available through the SGD Testnet since 2025, when DBS, OCBC and UOB completed the first live trial settling overnight interbank loans with it. Chia said MAS is now moving to settle tokenised MAS Bills with the wholesale CBDC — a trial first announced last November, with the first two issues dated September 23 and October 9. MAS’s logic is clear: let retail and crypto markets use regulated stablecoins, while anchoring wholesale settlement in bank and central bank money. Stablecoins are explicitly pinned outside the settlement hierarchy.

Some Takeaways for Practitioners