FSB Warns Crypto Nearing Tipping Point as Stablecoins Deepen TradFi Ties

Summary

The Financial Stability Board (FSB) warns of increasing risks from the crypto sector, highlighting critical interlinkages with traditional finance. Outgoing FSB Chair Klaas Knot stated that while crypto currently does not pose a systemic risk, it may soon reach a tipping point. The entry barriers for retail investors have significantly decreased, especially with the rise of crypto exchange-traded funds (ETFs). Concerns also center on the stablecoin market, where issuers hold substantial US Treasurys, enhancing ties to traditional finance. The stablecoin market cap exceeds $251 billion, with research indicating that stablecoin inflows can lower short-term Treasury yields, while outflows raise them. The US Senate has advanced the GENIUS Act, aimed at establishing regulatory clarity for dollar-backed stablecoins, which could enhance the US digital asset industry's competitiveness.

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