Financial Stability Board Updates Risk Assessment On Crypto-Assets

The Financial Stability Board ("FSB") updated its assessment of the risks to financial stability created by crypto-assets. In the new report, the FSB considered three segments of the crypto-asset markets: (i) unbacked crypto-assets such as Bitcoin, (ii) stablecoins and (iii) decentralized finance and other crypto-asset trading platforms.

The FSB reviewed the growth of the crypto-asset market over the past few years and highlighted the public policy concerns that arise from the lack of understanding of crypto-assets among investors and consumers. The FSB notes the expanding links between crypto-assets and traditional financial markets and identified some of the structural vulnerabilities with respect to crypto markets and stablecoins. These vulnerabilities include (i) liquidity mismatches, (ii) credit and operational risks, (iii) susceptibility of stablecoins to sudden and disruptive runs on their reserves, (iv) the increased use of leverage, (v) the concentration of