Cryptocurrency may be approaching a point where it could threaten the stability of the global financial system, according to the outgoing chair of the Financial Stability Board (FSB), Klaas Knot.
In a recent speech in Spain, Knot acknowledged that despite issues like bankruptcies, liquidity crises, and fraud in the sector, the FSB has consistently maintained that crypto currently does not pose a systemic risk. However, he cautioned that recent trends, including an increase in retail adoption and stronger connections with traditional finance, suggest we might be nearing a critical juncture.
Knot also highlighted that stablecoin issuers now hold significant amounts of US Treasuries, emphasizing the need for close monitoring of this segment. He noted that the cross-border nature of cryptocurrency underscores the importance of the FSB’s recommendations as regulators worldwide work to develop frameworks.
In response to Knot’s remarks, Nick Jones, CEO of the digital assets platform Zumo, stated, “If the FSB looks through a different lens, stablecoins and other crypto assets have substantial potential to enhance financial resilience by offering cost savings, faster transaction processing, and advanced security features grounded in cryptographic principles.”