"We know what would happen if there was a run on a stablecoin—they'd all turn up here," Bailey added.
The FSB's leverage does not depend on formal rulemaking authority, but on “shaping a baseline international consensus that jurisdictions often converge toward” as cross-border risks emerge over time, Stablecoin Standard chairman and co-founder Christian Walker told Decrypt.
"Stablecoins are inherently global, so long-term fragmentation between U.S., UK, EU and Asian regimes is unlikely to be sustainable," Walker said. While implementation remains uneven, the FSB’s recommendations still “shape how central banks, prudential regulators and institutional participants assess credibility and systemic risk,” he added.
Bailey appears to overstate the convertibility risk because dollar-denominated instruments have functioned offshore for decades without direct central bank redemption lines, according to Ran Hammer, chief business officer at Orbs, who told Decrypt that "eurodollars don't have a direct redemption line to the Fed either, and the system functions fine."
“If liquidity dries up on one venue, arbitrage closes the gap across the rest. The real question is reserve quality and transparency. Get that right, and the rest sorts itself out,” Hammer added.
The FSB's chair was pointing to a specific risk in his warning: that the U.S. framework has externalized redemption pressure to jurisdictions with stronger convertibility guarantees, Jamie Green, COO at Superset, told Decrypt.
"He's worried the UK ends up absorbing the redemption risk that the U.S. framework has externalised," Green said, adding that holders in jurisdictions with stronger guarantees could become an “exit route” during stress events.
The U.S. framework extends redemption to a seven-day window during stress while the UK regime requires 1:1 redemption at all times via central bank deposits, noted Rohit Sahblok, managing director at GRT Consulting, who told Decrypt the GENIUS Act is "probably more innovation friendly requiring robust reserves whilst the UK version is built for a payment system that can reliably be 1 to 1 at all times."
Market access, not the FSB, is the real leverage, with the UK able to lock non-compliant U.S. stablecoins out of regulated payment rails, said James Brownlee, CEO of Tether-backed stablecoin firm t-0.
"That's a de facto trade barrier, and it's much harder to ignore than a set of non-binding recommendations," Brownlee told Decrypt. Cutting UK businesses off from a lower-friction global payments system carries costs policymakers will be keen to avoid, he noted.
