The Financial Stability Board has published a report on the risks that crypto-assets pose to global financial stability. The FSB observes that the crypto-assets market is growing rapidly and could reach a point where it poses a threat to global financial stability. The market's rapid evolution also raises the risk of regulatory gaps and the opportunity for arbitrage by market players. The report covers the following areas:

• Vulnerabilities concerning unbacked crypto-assets: these include financial sector exposures to the unbacked crypto-asset world, as there is increased interconnection with the wider financial system, and the potential for a sudden loss of confidence in the crypto-asset market which may, in a future period of market stress, cause crypto-assets to fall in tandem with regulated risky assets and amplify a market correction.
• Vulnerabilities concerning stablecoins: these include the potential for large-scale redemptions on the stablecoin's reserve assets to trigger fire-sales of those assets, causing market disruption, and the potential for future "global stablecoins" (i.e., stablecoins with a potential reach across multiple jurisdictions) to enter the mainstream financial system, leading to a host of financial stability risks.
• Decentralized finance and crypto-asset trading platforms: regulatory threats arising from DeFi include its decentralized governance structure which makes it difficult for regulators to identify the body responsible for compliance and the anonymity of transactions which makes it difficult to trace transactions, thereby increasing the risk of financial crime.
• Data gaps: there is a lack of transparent and trusted data on crypto-asset markets, including in areas such as the share of households and assets relative to each household which hold investment in unbacked crypto-assets, the volume of crypto-asset fraud, and the number and value of transactions being conducted in unbacked crypto-assets and stablecoins.

The report then summarizes the FSB's key plans for 2022, which include exploring the potential regulatory implications of unbacked crypto-assets and continuing to monitor and share information on regulatory approaches to support the implementation of its recommendations for regulation and oversight of global stablecoin arrangements.

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