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Assessment of Risks to Financial Stability from Crypto-assets

23 November 2022

In February 2022, the FSB issued a report “Assessment of Risks to Financial Stability from Crypto-assets” to examine the threat of the fast evolving Crypto-asset markets to the global financial stability.

Institutional involvement in crypto-asset markets, both as investors and service providers, has grown over time. Just in 2021 Crypto-asset market capitalisation raised by 3.5 times to $2.6 trillion. Therefore, the FSB concluded that Crypto-assets cloud represent a threat to global financial stability due to their scale, structural vulnerabilities, and increasing interconnectedness with the traditional financial system.

The report examines developments and associated vulnerabilities relating to three segments of crypto-asset markets:

  1. Unbacked crypto-assets
  2. Stablecoins
  3. Decentralized finance (DeFi) and crypto-asset trading platforms

However, the FSB notes the close, complex, and constantly evolving interrelationship between these three segments.


Crypto-assets, as the term is used in this report, are a type of private sector digital asset that depends primarily on cryptography and distributed ledger or similar technology


  • Digital means of exchange that are not backed by an issuer (such as bitcoin), or other digital tokens, including securities tokens
  •  Asset-backed tokens representing ownership interests in property, so-called utility tokens used to obtain access to goods or services on a particular digital platform
  • Nonfungible tokens (“NFTs”) used as collectibles or investment instruments




A category of crypto-assets that aim to maintain a stable value with reference to a specified asset, or basket of assets, and provide perceived stability when compared to the high volatility of unbacked crypto-asset.

Uses of Stablecoins:


  • Acting as a bridge between traditional fiat currencies and a variety of (typically more volatile) digital assets
  • Serving as collateral in crypto-asset derivative transactions
  • Facilitating trading/ lending/borrowing and acting as collateral in DeFi


Decentralised Finance (“DeFi”)

DeFi is based on distributed ledger technology (DLT) (typically public and permissionless blockchains) to offer financial services and products purportedly without the need for intermediaries.


Distinguishing DeFi from traditional finance

  • Openness: DeFi relies on open-source technology
  • Trustless: DeFi platforms allow anyone who can provide the requisite amount of collateral to use the platform in an automated transaction
  • Permissionless: anyone can use DeFi protocols as long as they can fulfil the protocol’s requirements
  • Claims of decentralised ownership and governance structure: Some DeFi protocols purport to rely on voting by governance token holders to make decisions

Vulnerabilities associated with crypto-asset markets:

  • Increasing linkages between crypto-asset markets and the regulated financial system
  • Liquidity mismatch, the structure of stablecoins means they are exposed to liquidity mismatch, credit and operational risks, which makes them susceptible to sudden and disruptive runs on their reserves
  • The increased use of leverage in investment strategies
  • Concentration risk of trading platforms
  • The need of effective regulation and oversight commensurate to the risks they pose, both at the domestic and international level
  • Low levels of investor and consumer understanding of crypto-assets, money laundering, cyber-crime and ransomware


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