FSB Flags Mounting Crypto Risks as Stablecoins Tighten Grip on Finance

The Financial Stability Board is growing increasingly uneasy about crypto’s expanding footprint in global finance, cautioning that the lines between digital assets and traditional markets are blurring faster than expected.

During remarks in Madrid, Klaas Knot—soon to exit his role as FSB chair—warned that while crypto doesn’t yet endanger the broader financial system, that could soon change. With easier retail access through ETFs and rising institutional exposure, the sector may be approaching a critical threshold.

A major focus of concern is the stablecoin market. Issuers now hold vast reserves of U.S. Treasurys, tightening the link between digital assets and mainstream finance. Knot emphasized that this evolving connection demands close regulatory scrutiny.

Recent studies support those worries. Research from the Bank for International Settlements shows that stablecoin flows already influence short-term Treasury yields. Inflows can drag yields down by up to 2.5 basis points, while outflows can spike them by as much as 8—underscoring the sector’s growing market impact. Tether and USDC are the most influential players, according to the data.

As Knot prepares to step down at the end of June, he leaves behind an ecosystem in transition. Bank of England Governor Andrew Bailey is set to take over at the FSB, just as U.S. lawmakers advance the GENIUS Act—a bill that would create national rules for stablecoin issuers. If passed, it could help solidify the U.S. as a leader in regulated digital finance.