Global Watchdog Points at Growing Force of Crypto with Another Usual Warning
The Financial Stability Board (FSB), an international body that monitors and prepares recommendations about the global financial system, is increasingly ringing the alarm about crypto. The institution’s latest report claims that cryptoasset markets are rapidly evolving and could reach a point where they pose a threat to global financial stability due to their scale, structural vulnerabilities, as well as increasing interconnectedness with the traditional financial system.
"Cryptoasset market capitalization grew by 3.5 times in 2021 to [USD] 2.6 trillion, yet crypto-assets remain a small portion of overall global financial system assets," the FSB said in a statement summarizing the report’s findings. Direct connections between crypto and systemically important financial institutions and core financial markets, it said, while growing rapidly, are currently limited.
At the same time, institutional involvement in cryptoasset markets, both as investors and service providers, has grown over the last year.
“If the current trajectory of growth in scale and interconnectedness of crypto-assets to these institutions were to continue, this could have implications for global financial stability,” according to the board.
The FSB perceives that decentralized finance (DeFi) has established itself as a fast-emerging sector, while a relatively small number of cryptoasset trading platforms aggregate various types of services and activities, such as lending and custody.
Some of these platforms run their operations outside of a jurisdiction’s regulatory framework, or are not in compliance with applicable national laws and regulations which could potentially lead to a concentration of risks, and underscore the lack of transparency on their
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