The Financial Stability Board (FSB) has issued a stark warning on escalating crypto sector risks, highlighting that interlinkages with traditional finance are approaching critical levels, according to outgoing Chair Klaas Knot.
Speaking in Madrid on Thursday (date context removed), Knot cautioned that while systemic risk from crypto to traditional finance remains “latent,” it may persist for only “a relatively short time.” He identified a potential “tipping point” nearing for this dynamic.
Falling Barriers & Stablecoin Risks
Knot pointed to the significant simplification of entry points for retail investors, largely due to the advent of crypto exchange-traded funds (ETFs). These instruments permit exposure to digital assets without the complexities of managing private keys or navigating exchanges.
Another focal point of concern, particularly regarding US Treasury holdings by stablecoin issuers, is the growing integration of stablecoins within established financial systems, the chair noted. This deepening interconnection between crypto and traditional finance requires heightened monitoring.
Stablecoins Imbedded Deeply
Stablecoins, pegged to fiat currencies like the US dollar, are increasingly integral within global financial infrastructures. The DeFiLlama tracker indicates a market capitalization exceeding $251 billion.
A Bank for International Settlements (BIS) research paper analyzing the impact of stablecoins on finance found a quantifiable effect on short-term US Treasury yields. The study, using data from 2021 to 2025, concluded that stablecoin inflows suppress three-month Treasury yields by 2-2.5 basis points after ten days, with corresponding increases observed on outflows.
Knot set the stage for his impending departure, scheduled for June 30, ceding his role at both the FSB and the Dutch central bank (De Nederlandsche Bank) to his successor. Governor Andrew Bailey of the Bank of England is expected to follow him at the FSB, while the appointment of a replacement in the Netherlands remains pending.
Senate Advances Stablecoin Bill (GENIUS Act)
The momentum for regulatory clarity moved forward on Wednesday as the U.S. Senate approved 68-30 the “GENIUS Act.” This legislation aims to establish a framework for dollar-pegged stablecoins. Its passage would position the U.S. as a leader in this domain. The bill now moves to the House for consideration.
Magazine: Older investors are risking everything for a crypto-funded retirement
