The Financial Stability Board (FSB) is raising new concerns about the growing entanglement between the cryptocurrency sector and traditional finance, warning that the global financial system may be approaching a critical threshold.
Speaking in Madrid on June 12, outgoing FSB Chair Klaas Knot cautioned that while crypto assets currently do not pose a systemic risk, the situation is rapidly evolving. “We may be approaching a tipping point here,” he said, stressing that mounting linkages—particularly through stablecoins and crypto investment products—demand urgent attention.
According to Knot, one key driver is the sharp decline in barriers to retail investing. The introduction of crypto exchange-traded funds (ETFs) has opened new channels for individuals to access digital assets without dealing with the complexities of wallets or private keys. This ease of access has amplified exposure across mainstream portfolios.
Another area flagged by the FSB is the burgeoning stablecoin market. Issuers of these fiat-pegged digital tokens—such as USDT and USDC—now hold significant volumes of US Treasurys, drawing deeper financial connections between crypto platforms and public debt markets.
Data from DefiLlama indicates that the total market capitalisation of stablecoins exceeds $251 billion, underscoring their expanding footprint. A recent study by the Bank for International Settlements further highlighted their impact, revealing that stablecoin inflows can lower short-term US Treasury yields by up to 2.5 basis points. In comparison, outflows can lift them by as much as 8 basis points—effects seen almost entirely in three-month maturities.
Among stablecoin issuers, Tether (USDT) was found to have the most pronounced influence on Treasury markets, followed by Circle’s USD Coin (USDC).
Knot, who also heads De Nederlandsche Bank, is stepping down from both roles on June 30. His successor at the FSB will be Bank of England Governor Andrew Bailey, while the Dutch central bank has yet to name a replacement.
Meanwhile, in Washington, lawmakers are advancing efforts to provide regulatory clarity to the stablecoin space. On June 11, the US Senate voted 68–30 to move forward with the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.
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