TL;DR: A Coinbase-funded think tank says emerging markets hold about two-thirds of global stablecoin supply and urges governments to license local-currency coins before dollar tokens take over. The Financial Stability Board warns G20 leaders that cross-border stablecoin oversight is still immature and untested in a crisis. Meanwhile, the UK has hit Russia’s A7 sanctions-evasion network with fresh sanctions, even as A7 launches a “compliant” USDT-to-SWIFT payment service.
Key Takeaways:
Stablecoins are emerging markets’ secret weapon, global finance ministers’ riddle to be solved, and a chance for a Russian sanctions-dodging machine to turn over a new leaf.
A new paper by a think tank funded by the Coinbase (NASDAQ: COIN) digital asset exchange says “about two-thirds of global stablecoin supply” is currently held by users in emerging markets and developing economies (EMDEs), “where payment and contracting frictions are highest.”
As befitting a company with a significant financial interest in seeing the spread of the USDC stablecoin issued by Circle (NASDAQ: CRCL), Coinbase’s paper takes a fatalistic Borg-like ‘you will be assimilated’ approach to stablecoin adoption, warning that “the question for policymakers is no longer whether stablecoins arrive but whether they arrive inside a regulatory perimeter or outside one.”
The paper claims one of stablecoins’ chief selling points is the technology’s more streamlined peer-to-peer nature, compared to traditional banks and the “macroeconomic cost” of tradfi factors like ‘subsidized deposit insurance.’ And yet, other studies have repeatedly stressed that stablecoin adoption would be far greater if consumers believed they could enjoy “bank-level fraud protection and deposit insurance” via stablecoin transactions.
The Coinbase paper profiles case studies in three markets—Brazil, India and Indonesia—and finds “the binding constraint in each is policy rather than technology.” As the world’s largest remittance recipient, India is said to have “the most to gain and among the tightest policy constraints,” but the Reserve Bank of India “leans toward prohibition” of stablecoins regardless of their denomination and imposes onerous taxes at both ends of the on- and off-ramps.
Similarly, Brazil suffers from unclear definitions on stablecoin issuance and taxation, as well as a desire to funnel transactions into existing payment rails. Indonesia has yet to approve any stablecoin or other crypto payments, while its financial infrastructure lags both India and Brazil.
The paper’s authors warn that nations need to “license a credible domestic-currency coin early” and “ring-fence” tokens denominated in foreign currencies, like those based on the U.S. dollar, which accounts for ~98% of the overall stablecoin market cap. Failure to abide by this proposal will turn these countries into Nigeria, which has learned at its cost that “dollar coins arrive anyway and are hard to unwind.”
G20 fin-mins talk stablecoins, financial stability
On October 8, Financial Stability Board (FSB) chairman Andrew Bailey (also Bank of England governor) issued a letter to G20 finance ministers and central bank governors detailing the FSB’s “deliverables requested by the US G20 Presidency” to help safeguard financial stability.
Bailey flags stablecoins as an area in which “the interaction of regulatory frameworks across borders remains uncertain or undefined in many jurisdictions, including regarding the treatment of foreign-issued stablecoins.” Despite stablecoins’ rising profile, “mechanisms for cross-border oversight, crisis management, accountability and cooperation in stress or insolvency, remain immature or are not yet developed.”
In a separate stablecoin-focused document accompanying the letter, the FSB defines ‘global stablecoins’ as those with “a reach and use across multiple jurisdictions and could become systemically important in one or more of them.” How tokens are used in different jurisdictions—whether for payments or as a store of value—has “potential implications for the nature and severity of the vulnerabilities they present.”
In Europe, for example, the Markets in Crypto-Assets Regulation (MiCA) framework requiring companies to be based in one European Union market leads to what’s known as ‘multi-country issuance.’ Think of the U.S.-based Circle as the primary issuer of USDC while a French subsidiary issues the token for use in EU markets, both using the same smart contract.
MiCA requires Circle’s French offshoot to redeem USDC immediately, while the regulations underpinning America’s GENIUS Act would allow Circle two business days in which to fulfill redemption requests. MiCA also imposes significantly larger cash reserve requirements on stablecoin issuers than GENIUS.
The FSB notes that affiliated multi-issuers “jointly share liability for a single global stablecoin but hold separate reserves, whose rebalancing may face frictions during stress.” Depending on their level of panic, USDC holders in America might hit up the French subsidiary for redemption, leaving the French unit facing a tsunami of redemption requests that exceed its local reserves.
Reserve rebalancing between affiliated issuers “may re-align redemption flows with reserves, but their effectiveness depends on reserve mobility, market access, information flows and coordination that may break down during stress. Moreover, if the location of some holders is not possible or difficult to ascertain, the attribution of liabilities to individual issuers and the legal claims of holders may be unclear in stress and in insolvency.”
The FSB warns that “cross-border aspects of global stablecoins can also amplify liquidity mismatches, run risk and operational fragility, while insolvency would raise legal and operational questions.” There could be particular challenges in EMDEs “due to currency substitution, bank disintermediation and challenges with capital flow management, so that stablecoins could become systematic at a lower threshold of use.”
The FSB’s bottom line is that “global stablecoins and national regulatory frameworks remain untested in severe stress and insolvency.”
While the FSB has no authority to order any nation to act, it nonetheless proposes a number of potential fixes, including “enhanced monitoring of cross-border vulnerabilities; supporting implementation of the FSB’s 2023 recommendations on global stablecoin arrangements; strengthening cross-border cooperation and information-sharing; and gathering information on emerging approaches to planning for distress or failure of a global stablecoin arrangement, with a particular focus on cross-border issues.”
From Russia with WTF
Coinbase’s EMDE stablecoin report largely dismissed the use of stablecoins for criminal activity or use by sanctioned individuals/entities, noting that “financial crime is neither new nor unique to stablecoins” and “illicit finance is not a problem that the technology invented.” True enough.
Regardless, on October 8, the UK government targeted “the Kremlin-backed A7 illicit finance network” with a new round of economic sanctions, following similar crypto-focused penalties imposed in May. This network relies on the A7A5 ruble-denominated stablecoin, which in less than two years became the primary conduit for Russia’s efforts to evade Western sanctions.
This latest round of sanctions targets three digital asset exchanges, two payment platforms, and one individual. As with the UK’s previous A7-related sanctions and similar measures imposed by the EU and U.S. authorities, most of the entities on the list are based in Kyrgyzstan. But one (Xeltox Enterprises) is based in Vancouver, Canada, where it operates two crypto platforms.
A7A5, which is partly owned by Russia’s state-owned PSB Bank, was launched in January 2025, apparently with an eye towards a sanctions-evasion tool that couldn’t be frozen by a stablecoin issuer looking to make nice with the U.S. government. Like, say, Tether, issuer of the market-leading USDT stablecoin, which has of late been only too eager to freeze tokens flagged by U.S. authorities.
So color us confused when A7 announced the launch of A7 International, a cross-border payment service aimed at helping businesses and individuals to make fiat payments via the SWIFT messaging network using USDT.
A7 claims that individuals looking to use the service will have to undergo ‘know your customer/know your business’ checks, which doesn’t really jibe with A7’s existing ‘sanctions artful dodger’ vibe. PSB bank chairman Petr Fradkov said the service presented “a new image of A7.” Do tell.
A7 International allegedly came about as the result of “requests from foreign entrepreneurs” who are seeking “a remote service compliant with local legislation on digital assets and available only in those jurisdictions where cryptocurrency circulation is permitted.”
For the record, SWIFT launched a 24/7 tokenized payments pilot program this summer that’s compatible with stablecoins, central bank digital currencies (CBDCs) and other assets. But it’s hard to see why the major global banks that participated in this pilot would want to associate their names with Russia’s sanctions-dodging poster child.
Earlier this month, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) targeted the A7 Network as part of its Operation Economic Outcast against Iran. FinCEN called A7 “a shadow banking network with ties to Russia used by the Iranian regime to evade sanctions.” Treasury’s Office of Foreign Assets Control (OFAC) simultaneously designated A7 as “a significant transnational criminal organization.”
Notably, A7 International’s terms of use stress that it is not a bank but fails to disclose the names of the “third party providers” who actually perform those direct banking functions. FinCEN has proposed a rule that would “prohibit transmittals of funds regarding transactions involving the A7 Network’s Sub-Agents,” a proposal that would apply to “any covered financial institution.”
FAQs:
Where are most stablecoins held?
According to the Coinbase-funded paper, about two-thirds of global stablecoin supply is held by users in emerging markets and developing economies.
What does the Coinbase paper recommend?
It says EMDEs should license a credible domestic-currency stablecoin early and ring-fence foreign-currency tokens, especially USD-pegged ones, before they become entrenched, as happened in Nigeria.
What is the FSB worried about?
Cross-border stablecoin regulation remains fragmented and untested. The FSB’s concerns include run risk, liquidity mismatches, unclear legal claims during insolvency, and the treatment of foreign-issued stablecoins.
What is “multi-country issuance”?
It’s when affiliated entities in different jurisdictions issue the same stablecoin using one smart contract but hold separate reserves. USDC, issued by Circle in the US and by a French subsidiary in the EU, is the example the article uses.
Can the FSB force countries to act?
No. It can only recommend measures, such as better monitoring, stronger information-sharing, and planning for the failure of a global stablecoin.
What is A7A5?
A7A5 is a ruble-denominated stablecoin launched in January 2025 and partly owned by Russia’s state-owned PSB Bank. In under two years it has become the main channel for Russia’s efforts to evade Western sanctions.
What is A7 International?
It’s a new A7 service that takes USDT on the TRON network and arranges SWIFT bank transfers in USD, EUR, CNY, AED and other currencies. It charges a 0.3% commission and requires KYC/KYB checks.
Watch: CBDCs or stablecoins? What the industry leaders actually think
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