The Financial Stability Board (FSB) is sounding the alarm on growing risks from the crypto sector, warning that interlinkages with traditional finance are nearing a critical threshold.
Speaking in Madrid on Thursday, outgoing FSB Chair Klaas Knot said that while crypto does not yet pose a systemic risk to traditional finance, that status may not last much longer. “We may be approaching a tipping point here,” he said.
Knot noted that entry barriers for retail investors have “dropped significantly,” particularly with the introduction of crypto exchange-traded funds. Crypto ETFs allow investors to gain exposure to digital assets without managing private keys, using crypto wallets or navigating exchanges.
Knot added that another area of concern is the stablecoin market. He noted that issuers now hold large amounts of US Treasurys, which increases interlinkages between crypto and traditional finance. “That’s a segment that we clearly must monitor closely,” he added.
Related: Société Générale launches US dollar stablecoin on Ethereum and Solana
Stablecoins are embedded into financial systems
Stablecoins — digital assets pegged to fiat currencies like the US dollar — are becoming increasingly embedded into financial systems. According to data from DefiLlama, the total market cap of stablecoins is more than $251 billion.
A recent research paper by the Bank for International Settlements analyzed the growing impact of stablecoins on traditional finance, focusing on their influence on short-term US Treasury yields.
By using daily data from 2021 to 2025 and an instrumental variable method, the paper found that stablecoin inflows lower three-month Treasury yields by 2–2.5 basis points within 10 days, while outflows raise yields by 6–8 basis points.
These effects are concentrated in short-term maturities, with minimal impact on longer-term bonds. Among issuers, USDt (USDT) has the largest effect, followed by Circle’s USDC (USDC), confirming the influence of stablecoins in Treasury markets.
Knot, who also serves as president of the Dutch central bank, De Nederlandsche Bank, will step down from both roles on June 30. Bank of England Governor Andrew Bailey is set to succeed him at the FSB, while the Netherlands has yet to appoint a replacement.
Related: Fortune 500’s interest in stablecoins triples from last year
US Senate advances GENIUS Act
On Wednesday, the US Senate voted 68–30 to advance the Guiding and Establishing National Innovation for US Stablecoins, or GENIUS Act, a key stablecoin bill aimed at establishing regulatory clarity for dollar-backed digital assets. The vote paves the way for floor debate and a final vote before the bill moves to the House of Representatives.
If passed, the bill would create a national framework for stablecoin issuance, boosting the US digital asset industry’s global competitiveness.
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