Crypto Nearing Systemic Risk Level, FSB Chair Warns in Final Speech

Crypto Nearing Systemic Risk Level, FSB Chair Warns in Final Speech

Stablecoins, ETFs Push Digital Assets Closer to Financial Mainstream

Outgoing FSB Chair Cautions Against Growing Integration with Traditional Finance

Klaas Knot, outgoing Chair of the Financial Stability Board (FSB), has issued a sobering warning to global regulators: the crypto sector’s integration with traditional finance may be reaching a critical tipping point.

Speaking in Madrid on Thursday, Knot acknowledged that crypto does not yet present systemic risk—but that may soon change.

“We may be approaching a tipping point here,” Knot stated, as he detailed concerns about the expansion of crypto ETFs and stablecoin holdings of U.S. Treasurys, which are deepening the financial links between digital assets and traditional markets.

Stablecoins and ETFs Fuel Crypto’s Infiltration of Mainstream Finance

Knot emphasized that retail investor entry barriers have plummeted, due in part to the rise of crypto exchange-traded funds (ETFs). These products allow traditional investors to gain exposure to cryptocurrencies without handling private keys or navigating unfamiliar platforms.

A more urgent concern, however, is the rapid growth of the stablecoin market, which is becoming increasingly entwined with global financial infrastructure.

“That’s a segment that we clearly must monitor closely,” Knot said, referring to the significant volumes of U.S. Treasurys now held by stablecoin issuers.

$251 Billion Stablecoin Market Is Moving Bond Yields

According to DeFiLlama, the total market capitalization of stablecoins now exceeds $251 billion. Recent analysis by the Bank for International Settlements (BIS) found that stablecoin inflows reduce three-month U.S. Treasury yields by 2–2.5 basis points within 10 days, while outflows increase yields by 6–8 basis points.

The study also observed that these effects are concentrated in short-term maturities, with longer-term bonds largely unaffected. Among the top issuers, Tether’s USD₮ (USDT) has the greatest influence, followed by Circle’s USDC.

This interaction between stablecoins and sovereign debt markets has prompted rising concern over financial stability implications.

Leadership Transition at FSB as Crypto Risks Rise

Knot, who also serves as President of De Nederlandsche Bank, will step down from both posts on June 30. Andrew Bailey, Governor of the Bank of England, is expected to take over as FSB Chair, though a replacement for Knot in the Netherlands has yet to be announced.

Regulation on the Horizon: US Senate Moves Forward on Stablecoin Bill

As global regulators debate oversight, the U.S. Senate on Wednesday advanced the GENIUS Act—a proposed bill to create a national regulatory framework for dollar-backed stablecoins. The measure passed with a 68–30 vote, clearing the path for floor debate and a final Senate vote before moving to the House.

If enacted, the GENIUS Act could solidify the U.S. as a regulatory leader in stablecoin issuance, reinforcing the country’s digital asset competitiveness on a global scale.

Related: Fortune 500’s interest in stablecoins triples from last year