FSB Crypto Recommendations: The Financial Stability Rules That Governments Must Implement

The Financial Stability Board was created in April 2009, in the aftermath of the 2008 global financial crisis, by G20 leaders who concluded that the international financial system needed an institution specifically mandated to identify systemic risks and coordinate regulatory responses. The FSB’s predecessor, the Financial Stability Forum, had existed since 1999 but lacked the membership and mandate to be effective at the G20 level. The new FSB brought G20 members together with major international financial institutions and standard-setting bodies — the BIS, IMF, World Bank, IOSCO, BCBS, IAIS — under a strengthened mandate to promote global financial stability.

The FSB’s operational model is to identify risks, develop high-level recommendations for regulatory response, and monitor implementation through peer review. Its recommendations do not have legal force — no national legislature is compelled by an FSB paper. But FSB recommendations endorsed by G20 leaders carry the political weight of the world’s largest economies, and the peer review process creates accountability for implementation that shapes regulatory behaviour in practice.

The FSB’s Mandate on Crypto

The FSB began monitoring crypto markets for financial stability implications around 2018, as Bitcoin’s price surge and the ICO bubble attracted retail investor participation at scale and created potential spillover risks. Early FSB crypto reports assessed risks and monitoring approaches without recommending specific regulatory action.

The posture changed after 2021-2022. The Terra/Luna collapse, the FTX failure, the Celsius and Voyager insolvencies, and the broader crypto market decline of 2022 demonstrated that crypto markets could inflict significant losses on retail investors at scale, that interconnections between crypto firms and traditional finance were growing, and that the absence of adequate regulatory frameworks was permitting practices — commingling of customer funds, unsupported leverage, inadequate disclosure — that would not be tolerated in regulated financial markets.

In October 2022, the FSB published a crypto risks assessment and committed to develop high-level recommendations for crypto regulation that G20 members could implement. These were published in July 2023.

The 2023 High-Level Recommendations: Crypto-Asset Activities

The FSB’s high-level recommendations on crypto-asset activities address the full spectrum of CASP functions. The core recommendations are:

Authorisation or registration: All entities providing crypto-asset services — exchanges, custodians, broker-dealers, trading platforms, lending services — should be required to obtain authorisation or registration from their national competent authority. No material crypto-asset service should be providable without regulatory oversight.

Same activity, same risk, same regulation: Crypto-asset services that are functionally equivalent to regulated financial services should be subject to equivalent regulatory requirements. An exchange that matches buyers and sellers of crypto assets should face requirements equivalent to those applicable to a securities exchange. A stablecoin issuer whose stablecoin functions as a payment instrument should face requirements equivalent to those applicable to e-money issuers.

Customer asset protection: Customer assets — crypto assets held on behalf of clients — must be segregated from the service provider’s own assets and protected in insolvency. The commingling of customer and proprietary assets, standard practice at several failed crypto firms, should be prohibited and enforceable.

Governance: Management and controlling shareholders should meet fit-and-proper standards. Governance frameworks should include appropriate risk management, conflict of interest management, and accountability for regulatory compliance.

Cross-border cooperation: Regulators should share information across borders and cooperate on supervision and enforcement. Crypto’s inherently cross-border character requires regulatory coordination that existing bilateral frameworks do not fully provide.

The 2023 Recommendations on Global Stablecoins

The FSB published separate but related high-level recommendations on global stablecoin arrangements — stablecoins with the potential for wide adoption across multiple jurisdictions. These recommendations were more demanding than those for ordinary crypto-asset activities, reflecting the systemic risk potential of a stablecoin with significant market penetration.

The stablecoin recommendations address:

Redemption rights: Holders of global stablecoins should have a legal right to redeem at par on demand. A stablecoin that cannot guarantee redemption at face value is not a stable store of value — the Terra/Luna algorithmic stablecoin failure demonstrated the consequences. Reserve assets must be sufficient, liquid, and legally protected to support at-par redemption.

Reserve asset standards: Reserve assets backing global stablecoins should be of high quality and liquidity — typically government securities or central bank deposits. The composition, management, and auditing of reserves should be publicly disclosed.

Governance arrangements: Global stablecoin arrangements require clear governance frameworks specifying who is responsible for what, how decisions are made, how conflicts of interest are managed, and how holders can exercise rights. Governance opacity — a characteristic of several stablecoin arrangements — should not be acceptable.

Regulatory oversight: National authorities should have oversight authority over global stablecoin arrangements operating in their jurisdictions, regardless of where the issuer is incorporated. This extraterritorial element addresses the use of offshore domicile to evade regulatory oversight.

Andrew Bailey and the FSB’s Current Direction

Andrew Bailey, Governor of the Bank of England, assumed the FSB Chair in July 2025, succeeding Klaas Knot of the Dutch central bank. Bailey’s tenure at the Bank of England included significant financial stability episodes — COVID market stress, the 2022 UK gilt market crisis — and his chairmanship of the FSB brings institutional credibility and a well-developed view of systemic risk.

Bailey has signalled that the FSB’s crypto agenda under his chairmanship will focus on implementation quality rather than new standards — ensuring that the 2023 recommendations are actually adopted by G20 members, rather than producing additional recommendation documents. The October 2025 peer review’s findings of significant implementation gaps provided the context for this focus: the problem is not insufficient recommendations but insufficient implementation.

From Recommendations to National Law

The pathway from FSB recommendation to national legislation is not direct but is well-established. FSB recommendations are incorporated into G20 communiqués, which create political commitment. National finance ministers and central bank governors return from G20 meetings and instruct their regulatory agencies to develop implementation legislation. The FSB peer review process creates timelines and accountability. Public FSB assessment of implementation status creates reputational pressure.

For jurisdictions seeking to attract international financial services business — and this includes virtually all financial centres — alignment with FSB standards is a commercial requirement. Institutional investors, international banks, and major financial intermediaries will not engage with unregulated counterparties if regulated alternatives exist. FSB-aligned regulation creates the conditions under which cross-border institutional business flows.

The FSB’s crypto recommendations are thus not optional guidance to be selectively adopted. They are the international standard against which national crypto regulation is measured by the markets, by peer regulators, and by G20 political processes. Understanding what the FSB recommends is essential to understanding why national crypto frameworks look the way they do.