The Financial Stability Board (FSB) is sounding the alarm on growing risks from the crypto sector

Speaking in Madrid on Thursday, outgoing FSB Chair Klaas Knot said that while crypto does not yet pose a systemic risk to traditional finance

The Financial Stability Board (FSB) is highlighting the escalating risks posed by the cryptocurrency sector, warning that interlinkages with traditional finance are approaching a critical threshold.

Despite stating that crypto poses no systemic risk to traditional finance at present, outgoing FSB Chair Klaas Knot hinted at a pending tipping point during an interview with Tradeweb on Thursday.

Discussing the evolving landscape of crypto investing, Knot highlighted the reduced entry barriers for retail investors, signaled by the introduction of crypto exchange-traded funds (ETFs). These ETFs allow investors to participate in the crypto market without the technical hurdles of managing private keys, setting up crypto wallets, or navigating exchanges.

“That certainly puts more retail investors 'in the game' and may be approaching a tipping point,” Knot said.

Another area of concern mentioned by Knot was the stablecoin market. He noted that issuers now hold large amounts of U.S. Treasury bills, which in turn increases the interlinkages between crypto and traditional finance. “That’s a segment that we clearly must monitor closely,” he added.

Stablecoins are becoming increasingly embedded into financial systems. According to data from DefiLlama, the total market cap of stablecoins is more than $251 billion.

A recent research paper by the Bank for International Settlements explored the growing impact of stablecoins on traditional finance, concentrating on their implication in short-term U.S. Treasury yields.

By examining daily data from 2021 to 2025 and applying an instrumental variable method, the paper discovered that stablecoin inflows lower three-month Treasury yields by 2–2.5 basis points within 10 days, while outflows raise yields by 6–8 basis points. These effects are concentrated in shorter-term maturities, with minimal impact on longer-term bonds. Among issuers, USDt (USDT) has the largest effect, followed by Circle’s USDC (USDC), further highlighting the influence of stablecoins in Treasury markets.

Knot, who also serves as president of the Dutch central bank, De Nederlandsche Bank, will step down from both roles on June 30. Bank of England Governor Andrew Bailey is set to succeed him at the FSB, while the Netherlands has yet to appoint a replacement.

The U.S. Senate advanced a key stablecoin bill on Wednesday, voting 68–30 to move forward with the Guiding and Establishing National Innovation for US Stablecoins, or GENIUS Act.

The vote pushes the legislation toward a final vote in the Senate before it heads to the House of Representatives.

The bill, which seeks to establish regulatory clarity for dollar-backed digital assets, would create a national framework for stablecoin issuance, aiming to boost the U.S. digital asset industry’s global competitiveness. It specifically prohibits nonbank, supervised institutions from engaging in any activity that poses "systemic risk" to the financial stability of the United States.