The Financial Stability Board (FSB) has issued a warning about the increasing risks posed by the crypto sector, highlighting its deepening connections with traditional finance.
Speaking in Madrid on Thursday, outgoing FSB Chair Klaas Knot said that while crypto assets currently do not pose a systemic threat to the broader financial system, that could soon change. “We may be approaching a tipping point here,” he cautioned.
Knot pointed out that access for retail investors has become significantly easier, particularly with the rise of crypto exchange-traded funds (ETFs). These products allow individuals to invest in digital assets without the complexities of managing private keys, crypto wallets, or navigating exchanges.
He also flagged the stablecoin market as a growing area of concern, noting that issuers are now holding substantial amounts of U.S. Treasurys. This development is further tightening the links between crypto and traditional financial markets. “That’s a segment that we clearly must monitor closely,” Knot emphasized.
Stablecoins are becoming increasingly integrated into the financial system
Stablecoins — digital assets pegged to fiat currencies like the US dollar — are becoming increasingly integrated into the global financial system. According to DefiLlama, the total market capitalization of stablecoins has surpassed $251 billion.
A recent research paper from the Bank for International Settlements (BIS) examined the growing impact of stablecoins on traditional finance, particularly their effect on short-term U.S. Treasury yields.
Analyzing daily data from 2021 to 2025 and using an instrumental variable approach, the study found that inflows into stablecoins reduce three-month Treasury yields by 2 to 2.5 basis points within 10 days. Conversely, outflows lead to an increase in yields of 6 to 8 basis points.
These effects are largely concentrated in short-term maturities, with limited influence on longer-term bonds. Among stablecoin issuers, Tether’s USDt had the most significant impact, followed by Circle’s USDC — underscoring their growing role in Treasury markets.
Klaas Knot, who also serves as president of the Dutch central bank (De Nederlandsche Bank), will step down from both roles on June 30. He will be succeeded as FSB chair by Bank of England Governor Andrew Bailey, while the Netherlands has yet to announce Knot’s replacement.
U.S. Senate Moves Forward with GENIUS Act
On Wednesday, the U.S. Senate voted 68–30 to advance the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act — a significant piece of legislation aimed at providing regulatory clarity for dollar-backed digital assets.
The vote clears the path for floor debate and a final Senate vote before the bill proceeds to the House of Representatives.
If enacted, the GENIUS Act would establish a national framework for stablecoin issuance, strengthening the global competitiveness of the U.S. digital asset industry.
