The Financial Stability Board (FSB) emphasizes systemic risks in the cryptocurrency sector and calls for stricter regulation in light of growing interconnections with the traditional financial system.
Importance of Interconnections with Traditional Finance
Klaas Knot, Chair of the FSB, highlighted that the increasing interconnections between cryptocurrencies and traditional finance require attention to prevent systemic risks. Amid the dropping barriers for retail users, such as crypto ETFs, the situation raises concerns.
Risks of Stablecoins
Stablecoins like USDT and USDC, along with Bitcoin and Ethereum, are primary concerns due to their linkages to ETFs and the traditional financial system. Growing apprehensions are also associated with the accumulation of U.S. Treasuries by stablecoin issuers.
Need for Regulation
The FSB underscores the need to adapt regulations in response to urgent challenges. The GENIUS Act in the U.S. Congress aims at stabilizing digital assets, targeting synchronized global regulatory efforts.
The warning from the FSB illustrates an evolution in the perception of crypto assets and underscores the need for more stringent regulations as cryptocurrencies become more entwined with mainstream finance.
