I’ve been watching developments in crypto regulation closely, and the latest warning from the Financial Stability Board (FSB) really hit home for me—not just as someone interested in macroeconomics, but as someone trying to protect personal wealth in a volatile environment.
The FSB, a G20-mandated body devoted to safeguarding the global financial system, has just published a sobering peer review. Despite its efforts in 2023 to set high-level standards for crypto and stablecoin regulation, implementations across jurisdictions remain patchy and inconsistent.
Here’s the thing: cryptocurrencies don't respect borders. A firm can base operations in a lax jurisdiction and serve clients worldwide. When rules differ so widely, companies can engage in regulatory arbitrage—they pick the permissive regime, operate under light oversight, and expose participants (and counterparties) to risks that regulators elsewhere struggle to control.
Why this matters for individual investors
As someone who helps people allocate capital for retirement, I worry deeply about the linkages between crypto and "traditional" finance. In my conversations with clients, many believe crypto is a self-contained speculative universe. But increasingly, it's not. The FSB itself observed that while direct threats to financial stability are still considered “limited at present,” the risks are rising as the crypto market roughly doubled in size over the past year to about USD 4 trillion.
Another glaring gap is around stablecoins—cryptos that are pegged to fiat currencies like the U.S. dollar. In theory, they should offer predictability; in practice, many jurisdictions have not established strict rules to mandate transparency, reserves, or governance. The FSB flagged that few countries have complete legal frameworks for stablecoins.
When stablecoins fail, the fallout could ripple into payment systems, asset markets, or even central bank operations. For instance, a “run” on a stablecoin during stress might force redemptions, liquidity squeezes, and contagion into more conventional markets. That’s no longer just theory—it’s a vulnerability.
How regulators are (or aren’t) stepping up
The FSB’s 2025 assessment reviewed roughly 29 jurisdictions’ progress. Some have adopted elements of the 2023 rules; others lag or deviate. The body recommends faster, coordinated implementation; tighter cross-border supervision; better data sharing; and closing loopholes that let firms skirt obligations.
But here’s the rub: the FSB has no legal teeth. Its standards are persuasive, not binding. Countries can choose to follow—or ignore—them. That means it’s still largely up to national governments and regulators to do the heavy lifting.
What I’d advise you (if I were your portfolio coach)
- Don’t treat crypto as “outside” your portfolio.
Even if you hold a modest amount in crypto, your broader investments may feel indirect stress during market shocks. If digital assets collapse, assets correlated with them (tech stocks, illiquid alternatives, leveraged positions) could slip too. - Favor transparency and regulation.
If a stablecoin or platform doesn’t publish regular audits, reserve breakdowns, or proof-of-reserve statements, that’s a red flag. In markets with weak oversight, it’s easier to misstate risk. - Mind jurisdictional risk.
A platform licensed in a loosely regulated country might offer fancy yield or leverage—but that also means less recourse if things go south. Choose providers regulated in strong frameworks (EU, U.S., or Japan) when possible. - Stay liquid and diversified.
In times of stress, liquidity becomes king. Don’t be overexposed to assets that can’t be sold or converted immediately. Keep enough buffer in cash or highly liquid holdings. - Follow global rulemaking trends.
The FSB’s continuing work, along with regional efforts (EU, U.S., UK), may change the landscape dramatically. For example, the EU’s MiCA regime is intended to bring coherence to crypto rules—though some lawmakers already warn it may be too permissive.
Final thoughts
We stand at a crossroads. Crypto is no longer a niche curiosity for tech-savvy speculators. It’s becoming woven into payments, finance, and capital markets globally. But without shared guardrails, rule fragmentation gives bad actors room to maneuver—and that raises systemic danger.
If I'm advising someone building or preserving wealth today, I want their frameworks to anticipate not just upside but downside in volatile markets. I want them to see crypto risk as part of the same risk environment as equities, bonds, real estate. Because increasingly, it is.
Let me know if you’d like help drafting a “crypto safety checklist” for your own portfolio—or comparing how different countries are implementing FSB crypto recommendations.