On 16 February 2022, the Financial Stability Board (FSB) published its report, ‘Assessment of Risks to Financial Stability from Crypto-assets’. The report examines developments and associated vulnerabilities relating to three segments of crypto-asset markets which are, unbacked crypto-assets, stablecoins, and decentralised finance and crypto-asset trading platforms. The report also highlights a number of vulnerabilities associated with crypto-asset markets which include:

• increasing linkages between crypto-asset markets and the regulated financial system;
• liquidity mismatch, credit and operational risks that make stablecoins susceptible to sudden and disruptive runs on their reserves, with the potential to spill over to short term funding markets;
• the increased use of leverage in investment strategies;
• concentration risk of trading platforms; and
• the opacity and lack of regulatory oversight of the sector.

The report also notes wider public policy concerns related to crypto-assets, such as low levels of investor and consumer understanding of crypto-assets, money laundering, cyber-crime and ransomware.

The FSB will be exploring potential regulatory and supervisory implications of unbacked crypto-assets, including the types of actions FSB member jurisdictions have taken, or plan to take, to address any associated financial stability threats. The FSB will also continue to monitor and share information on regulatory and supervisory approaches to ensure the effective implementation of its high level recommendations for the regulation, supervision and oversight of “global stablecoin” arrangements.