The Financial Stability Board (FSB) published its first comprehensive assessment of global crypto regulation, revealing a sector racing ahead of its regulatory framework. While crypto market capitalization surged to $4 trillion in early August 2025, the FSB’s October 2025 thematic review shows that regulatory implementation remains incomplete, fragmented and insufficient to address mounting financial stability risks.
The review assessed how FSB member jurisdictions, which include leading financial centers and systemically important jurisdictions, are implementing the Board’s July 2023 framework. While it shows notable progress, it also exposes critical gaps that enable regulatory arbitrage and complicate oversight of an inherently global market.
This article is for compliance officers, risk managers, legal teams and executives at financial institutions navigating crypto markets. We break down the FSB’s 80-page review to highlight where critical regulatory gaps persist, which jurisdictions are furthest ahead and what fragmented implementation means for cross-border operations and supervision.
The FSB’s global regulatory framework has two distinct but complementary parts:
Progress differs dramatically between these frameworks. Of 28 jurisdictions assessed, 11 have reached the final stage and finalized regulatory frameworks for CASPs. But only five jurisdictions have finalized frameworks for stablecoins, despite stablecoins representing over $300 billion in market capitalization.
This difference reflects the complexity of regulating stablecoins. Many jurisdictions recognize they need tailored frameworks that treat stablecoins as distinct payment instruments rather than simply extending existing financial services regulation. But developing these frameworks while markets evolve rapidly has proven challenging.
Six jurisdictions, including China and Saudi Arabia, maintain outright prohibitions on cryptoasset activities. Others occupy various stages of development. Argentina, Canada and South Africa have partial regulations in place. Brazil, Korea, Switzerland and Uruguay have frameworks under public discussion. Australia, Armenia, the Philippines and the UK have proposed frameworks not yet finalized.
Even where regulatory frameworks exist, significant gaps undermine their effectiveness in addressing financial stability risks. The FSB thematic review identifies three particularly concerning areas.
Coverage of potentially high-risk activities remains inconsistent across jurisdictions. Lending, borrowing and margin trading are often excluded from regulatory frameworks. Among jurisdictions with finalized CASP regulations, many either don’t cover these activities or have frameworks still under development.
This creates opportunities for risk to grow unsupervised. CASPs can engage in activities that increase leverage and interconnectedness without appropriate oversight. The 2022 crypto winter demonstrated the danger. The collapses of Celsius, Voyager and Three Arrows Capital triggered cascading failures precisely because inadequately supervised lending activities created hidden systemic fragility.
For institutions using blockchain analytics to monitor exposure to CASPs, understanding which activities remain outside regulatory scope is essential. Elliptic’s transaction and wallet monitoring solutions enable firms to identify exposure to unregulated protocols and assess counterparty risk even where regulatory frameworks contain gaps.
Perhaps the most concerning gap involves regulatory reporting. While 19 jurisdictions have finalized comprehensive regulatory frameworks for CASPs, only 11 have implemented comprehensive reporting requirements. That means authorities can effectively monitor financial stability implications in just over half the jurisdictions with frameworks in place.
This disconnect is glaring. Authorities may be licensing CASPs without receiving the data necessary to identify emerging risks. The FSB notes that monitoring financial stability requires CASPs to submit data on financial condition, risk exposures, regulatory compliance and incident information. Without comprehensive reporting, regulators operate partially blind.
Some jurisdictions have found the right balance. Bermuda, the Philippines and Thailand have implemented comprehensive frameworks with standardized templates, disclosure obligations and mechanisms to request data ad hoc. Japan, Singapore and Hungary similarly maintain robust reporting requirements, though they collect non-financial risk data on an ad hoc basis rather than systematically.
This is where blockchain analytics becomes indispensable. On-chain data provides authorities with an independent verification mechanism for CASP activities. It offers real-time visibility that complements traditional reporting frameworks. Elliptic’s solutions enable regulators to track cross-chain activity and identify suspicious patterns that may not appear in self-reported data.
The review revealed a third critical gap: Supervision and enforcement efforts lag significantly behind regulatory framework development. Many jurisdictions have implemented licensing regimes, but have not yet deployed the tools necessary for effective ongoing oversight.
This matters enormously given crypto’s 24/7, borderless nature. Traditional supervisory approaches, designed for markets with defined trading hours and clear jurisdictional boundaries, struggle to keep pace with crypto markets that operate continuously across multiple jurisdictions simultaneously.
Authorities need capabilities to conduct real-time monitoring, respond rapidly to emerging risks and coordinate enforcement actions across borders. Blockchain analytics platforms provide precisely these capabilities. They enable authorities to investigate suspicious activity, trace illicit flows and gather evidence for enforcement actions regardless of when or where transactions occur.
The implementation gap widens substantially when examining stablecoin regulation. Only five jurisdictions — the Bahamas, Bermuda, the EU, Hong Kong and Japan — have finalized GSC frameworks. Eleven have no framework in place. The remaining fall somewhere between.
Meanwhile, stablecoins are increasingly integrating into traditional finance and taking on systemic importance. Stablecoin issuers have become significant participants in conventional financial markets through their reserve holdings, which now rival those of foreign governments or large money market funds. If issuers face stress and need to liquidate reserves rapidly to meet redemptions, market disruptions could follow.
Even where stablecoin frameworks exist, critical gaps persist. The FSB review identified insufficient requirements across four key areas.
The review dedicated significant attention to stablecoins issued from multiple jurisdictions. In these arrangements, issuers move reserves across borders (through “reserve balancing”) to meet redemption requests.
These arrangements create serious risks. Different jurisdictions impose different prudential requirements on the same stablecoin arrangement. One co-issuer might face strict capital requirements. Another might operate under lighter rules. This enables under-collateralization.
The problem intensifies during stress. Investors rush to redeem from whichever co-issuer offers the best terms: the fastest redemption or the lowest fees. This creates uneven pressure where one entity could face a surge of redemptions while another sees little demand.
Unhosted wallets make this challenge more complex, because they prevent the identification of where token holders are located. Without knowing where redemptions will come from, coordinating reserve management across jurisdictions becomes nearly impossible.
For example, a stablecoin might be issued by entities in Hong Kong, the EU and Singapore. Each faces different reserve requirements and redemption rules. Token holders can’t be geolocated. During a crisis, will redemptions concentrate in one jurisdiction? No one knows until it happens.
The FSB review also highlighted significant challenges in cross-border cooperation and coordination. Despite cryptoassets’ inherently global nature, cooperation mechanisms remain fragmented and inconsistent.
Most jurisdictions rely primarily on the IOSCO Multilateral Memorandum of Understanding (MMoU) or Enhanced MMoU (EMMoU) for cross-border cooperation. All FSB member jurisdictions are MMoU signatories, and many naturally leverage this as a common cooperation channel.
But the MMoU and EMMoU focus on sharing information for securities-related enforcement investigations. While some jurisdictions have used them for fit-and-proper assessments during authorization, they rarely extend to ongoing supervision or financial stability monitoring.
This creates a mismatch. The 24/7, cross-border nature of crypto markets requires ongoing supervisory information sharing, not just enforcement cooperation after violations occur. The review found limited evidence that current cooperation mechanisms adequately support financial stability monitoring.
Additionally, there are several other recurring barriers to effective cross-border cooperation:
Based on these findings, the FSB made eight recommendations addressed to jurisdictions, the FSB itself, standard-setting bodies and international organizations.
For banks, crypto exchanges and other financial institutions, these findings have several important implications
In a fragmented regulatory landscape where jurisdictions implement different requirements at different paces, blockchain analytics provides a critical advantage: On-chain data transcends jurisdictional boundaries. While cooperation mechanisms face legal barriers and regulatory definitions vary, blockchain technology offers a common, verifiable record of activities across borders.
