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BTC Pulse 2025-06-12 17:20:00

FSB Warns Crypto Nearing ‘Tipping Point’ as Stablecoins Deepen TradFi Ties

FSB Sounds ‘Tipping Point’ Alert as Crypto Grows More Embedded with Traditional Finance The Financial Stability Board (FSB) has sounded a stark warning on the increasing danger of crypto markets as they more embedded in traditional finance (TradFi). Speaking in Madrid, FSB Chair Klaas Knot said that the financial system may be moving towards a “tipping point” due to increasing interconnectedness via crypto ETFs and stablecoins. ETFs Lower Barriers to Retail Investor Entry Knot mentioned that crypto exchange-traded funds (ETFs) are making it easier than ever for retail investors to gain exposure to digital assets. By removing wallets, private keys, or exchanges as a necessity, ETFs introduce TradFi-like convenience with amped-up exposure to the highly volatile crypto universe. Although crypto remains not a systemic risk, Knot warned that this situation may shift in the near future as adoption increases. “We could be at a tipping point,” he said, calling for more regulation. Stablecoins Tie Crypto to US Treasurys Knot brought attention to the runaway growth in the stablecoin market as another area of concern. Digital currencies that are dollar-pegged are ubiquitous within financial systems and are collateralized, in most cases, by US Treasury reserves. This raises the potential for shocks to the crypto world to have impact on sovereign debt markets. FSB Leadership Change with Rising Regulator Focus According to DeFiLlama, today the stablecoins have a combined market capitalization of over $251 billion. Recent studies by the Bank for International Settlements (BIS) again illustrate their influence, as they can decrease three-month US Treasury yields by up to 2.5 basis points in 10 days by taking in stablecoin inflows and send them up by as much as 8 basis points when stablecoin outflows increase them. Tether (USDT) and USD Coin (USDC) are the strongest issuers, having a strong influence on short-term Treasury yield trends, the study found. FSB president Klaas Knot, who is also a president of the Dutch central bank, will leave his FSB role on June 30. Bank of England Governor Andrew Bailey will take over. The Dutch has not yet announced a replacement. The timing is urgent as regulators everywhere move towards creating frameworks for digital assets, including stablecoins, that are increasingly being considered financial instruments of systemic importance. GENIUS Act Advances in US Senate Adding to the regulatory momentum, the US Senate this week voted 68–30 to move forward with the GENIUS Act — a bill that would establish a national standard for stablecoin issuance. If passed, it would bring much-needed certainty to the US stablecoin market and add the country’s competitiveness to the digital asset space. The passage of the bill emphasizes growing concern over the systemic implications that come with the expansion of crypto, an attitude echoed by the FSB in its advocacy for tighter global regulation.

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