FSOC Warns of Stablecoin Risks and Calls for Federal Regulation

The Financial Stability Oversight Council's 2024 report highlights concerns over stablecoins, commercial real estate, and cyber threats to financial stability.

• The FSOC's 2024 annual report emphasizes the potential risks posed by stablecoins, including vulnerability to runs and lack of transparency in reserve management.
• Tether's dominance, comprising 70% of the global stablecoin market, is flagged as a concentration risk, alongside concerns over insufficient federal regulatory oversight.
• The council urges Congress to pass comprehensive legislation to address stablecoin risks, including market integrity, consumer protections, and reserve requirements.
• The report also highlights distress in the commercial real estate sector, driven by high vacancy rates and declining property values, as a growing systemic risk.
• Cybersecurity threats and regulatory gaps in overseeing third-party service providers are identified as additional areas requiring legislative action to safeguard financial stability.

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