The Financial Stability Board (FSB) has raised concerns about the increasing connections between the cryptocurrency sector and traditional finance, indicating that the situation may soon reach a critical point. Klaas Knot, the outgoing FSB Chair, spoke in Madrid on Thursday, expressing that while the crypto market does not currently present systemic risks to traditional finance, this may change as more retail investors enter the space. Knot pointed out that the introduction of crypto exchange-traded funds (ETFs) has lowered the barrier for retail investment, allowing individuals to invest in cryptocurrencies without needing to manage private keys or interact directly with crypto exchanges.
Another primary concern highlighted by Knot is the stablecoin sector, where issuers are increasingly holding significant amounts of US Treasury securities. This development has further intertwined cryptocurrencies with traditional finance, creating new vulnerabilities that warrant close monitoring.
Data shows that the stablecoin market has proliferated, with a total market cap surpassing $251 billion. A study from the Bank for International Settlements examined how stablecoins influence traditional finance, revealing that inflows into stablecoins can decrease short-term US Treasury yields, while outflows can raise them.
In a related effort, the US Senate recently voted to advance the GENIUS Act, aimed at providing regulatory clarity for stablecoins. If enacted, this legislation would establish a national framework for stablecoin issuance, which could enhance the competitive stance of the US digital asset industry on a global scale.
Another primary concern highlighted by Knot is the stablecoin sector, where issuers are increasingly holding significant amounts of US Treasury securities. This development has further intertwined cryptocurrencies with traditional finance, creating new vulnerabilities that warrant close monitoring.
Data shows that the stablecoin market has proliferated, with a total market cap surpassing $251 billion. A study from the Bank for International Settlements examined how stablecoins influence traditional finance, revealing that inflows into stablecoins can decrease short-term US Treasury yields, while outflows can raise them.
In a related effort, the US Senate recently voted to advance the GENIUS Act, aimed at providing regulatory clarity for stablecoins. If enacted, this legislation would establish a national framework for stablecoin issuance, which could enhance the competitive stance of the US digital asset industry on a global scale.
