For countries like Australia, which is still shaping its own regulatory stance, the stakes are rising, according to the Financial Stability Board, which said the lack of harmonised international standards is leaving both investors and institutions exposed.
FSB’s Thematic review on FSB global regulatory framework for crypto-asset activities has made high-level recommendations for the regulation, supervision and oversight of crypto-asset and global stablecoin markets and activities.
The FSB said analysis of implementation of the crypto-asset (CA) and global stablecoin (GSC) recommendations has revealed “significant gaps and inconsistencies” that could pose risks to financial stability and to the development of a resilient digital asset ecosystem.
“While jurisdictions have made notable advancements toward implementing the CA recommendations, few have finalised their regulatory frameworks for GSCs. Moreover, even where regulatory frameworks are finalised, full alignment with the FSB recommendations remains limited and jurisdictions may continue to update, modify or refine their frameworks,” the report said.
The FSB is concerned with uneven implementation across regions, which the organisation said creates opportunities for regulatory arbitrage and complicates oversight of the inherently global and evolving crypto-asset market.
“For crypto-asset activities, gaps remain in addressing financial stability risks, particularly in the regulation of crypto-asset service providers (CASPs). Comprehensive coverage of potentially higher risk activities, such as borrowing, lending and margin trading, is often lacking,” the report said.
Australia is in the process of developing regulatory frameworks for crypto-asset activities that address financial stability risks and the government has released draft legislation to regulate digital assets and tokenised custody platforms, which includes rules for currency-backed stablecoins.
Currently, existing financial services laws apply to crypto-assets in Australia if they meet one of the definitions for “financial product”. The Australian government has proposed a regulatory framework that does not depend on the “financial product” status of any particular digital asset.
According to the FSB: “The lack of harmonisation in how jurisdictions classify digital assets – as securities, commodities or payment instruments – was seen as a major barrier to global operations.”
The FSB said in some jurisdictions, licensing responsibilities are distributed across multiple authorities.
“In Australia, responsibilities are similarly divided between market and prudential supervisors. In other jurisdictions, ministries or executive branches play a direct role in licensing.”
The FSB believes leverage risks can arise when crypto-asset service providers allow users to borrow against their exposures, potentially leading to margin calls and cascading failures during market stress.
“Borrowing and lending services, for example, involve CASPs facilitating loans of crypto-assets or fiat currencies, often collateralised by users’ crypto-asset portfolios. CASPs can also increase their own leverage risk when they borrow funds from customers and other counterparties.” the report said.
Despite these risks, only two jurisdictions, Bermuda and The Bahamas, comprehensively regulate CASP borrowing and lending, requiring CASPs to manage counterparty risks and maintain capital and liquidity buffers.
“Other jurisdictions, such as Australia, Canada, and Switzerland, regulate CASP borrowing and lending in cases where the services meet the definition of existing financial products but otherwise the activities remain unregulated,” the report said.
Meanwhile, Australia and The Bahamas are the only two jurisdictions that permit derivatives trading, subject to licensing requirements, leverage limits and collateral rules.
When it comes to activities generating liquidity risks, regulatory approaches vary significantly.
“Other jurisdictions only partially address the risks of yield or earn programs, such as Australia, which covers them if the activity meets existing financial product definitions. Most other jurisdictions, including Argentina, Armenia, the EU, Japan, Singapore, and South Africa, do not explicitly address yield, earn or liquid-staking programs in their regulatory frameworks.”
The FSB has raised concerns over the issuance of crypto-assets by CASPs, particularly their own tokens, which introduces additional liquidity risks.
“These risks arise when CASPs issue tokens that represent a claim towards or liability of the CASP and engage in maturity or liquidity transformation with the proceeds of issuing such tokens. Poorly designed or inadequately disclosed token issuance processes can also lead to investor losses or market instability,” the report said.
When it comes to prudential requirements, Bermuda, Hong Kong and Thailand have requirements for CASPs to hold liquidity reserves.
“Australia imposes financial and cash flow modelling requirements but does not yet require stress testing or recovery plans for CASPs,” FSB said.
FSB has determined Australia as partially covering broader operational and governance risks but said the nation does not fully integrate financial stability considerations.
ASIC’s role in supervising CASPs under existing financial services laws has also been highlighted, with the FSB emphasising a focus should be on consumer protection, market integrity and operational risks.
“While ASIC’s framework is technology-neutral, no specific exams related to financial stability have been conducted.”
FSB commended Australia for its enforcement frameworks, explaining that the variation in approaches across jurisdictions reflects different stages of implementation and diverse approaches to managing risks in this rapidly evolving market.
“Many jurisdictions have comprehensive enforcement capabilities, employing a range of tools to regulate crypto-assets effectively. These include license suspension, the power to impose penalties, and international cooperation mechanisms. Jurisdictions such as Australia and Singapore use these tools effectively,” the report said.
“Enforcement experiences in these jurisdictions highlight proactive and diverse measures. Australia has taken action against major entities like Binance Australia and Kraken, addressing unlicensed conduct and consumer protection failures.”
Some jurisdictions have or are in the process of implementing specific regulatory frameworks tailored to stablecoins, including the European Union, Hong Kong, Japan, Singapore, and the US.
“Others, such as Australia, Canada, Chile, Mexico and Uruguay classify stablecoins under existing financial product laws but apply different approaches: Australia, in certain cases, treats stablecoins as financial products, such as non-cash payment facilities or derivatives,” the report said.
“In Australia, if a stablecoin is not a financial product there are no restrictions for banks regarding issuance beyond general consumer laws. If the stablecoin is a financial product then the entity would require a licence from the local market supervisor (unless an exemption applies).
“For crypto-asset activities, gaps remain in addressing financial stability risks, particularly in the regulation of crypto-asset service providers. Comprehensive coverage of potentially higher risk activities, such as borrowing, lending and margin trading, is often lacking.
Stablecoins may meet existing definitions of “financial products” and, depending on their structure, may be considered a non-cash payment facility, managed investment scheme, debentures or derivatives.
The Australian government has proposed plans to regulate stablecoins linked to the value of fiat currency.
“Australia, in certain cases, treats stablecoins as financial products, such as non-cash payment facilities or derivatives.”
The Financial Stability Board has called on authorities to have robust systems and processes in place to collect, record and report data. FSB said 13 jurisdictions, including Australia, France and Germany, lack regulatory reporting requirements for CASPs from a financial stability perspective.
“Differences in the extent and frequency of reserve asset disclosures, especially for the same stablecoin issued from multiple jurisdictions, could lead to financial stability risks if stablecoin holders lack sufficient information to determine the financial soundness of the issuer during periods of stress,” the report said.
According to the FSB, Australia is also one of 11 jurisdictions conducting limited monitoring of developments and activities that may not fully encompass financial stability risks.
Both FSB members, including Australia, and non-FSB members noted the top two risks as financial integrity and consumer protection, with over 75 per cent of all respondents considering them as “very important”.
By the end of 2025, a majority of FSB members expect to reach alignment with the crypto-asset and global stablecoin recommendations.
“Jurisdictions mandating local reserve holdings or imposing rigid redemption timelines complicate cross-border operations, threatening the interoperability of stablecoins as global settlement assets,” the report stated.
The Digital Economy Council of Australia was contacted for comment.
