The Financial Stability Board has warned that the use of unbacked digital assets like Bitcoin and stablecoins is a threat to global financial stability.
The report is a change of stance by the board, which stated in 2018 that cryptocurrencies did not pose any material risk to the global financial stability.
The international body observed that the impact of the instability would be large given the growing crypto market capitalization, which topped $3 trillion last year.
The report notes that stablecoins like USDT and USDC have seen an increasing market capitalization despite regulatory concerns.
The board warns that instability in the stablecoins market could affect DeFi space, and the impact could spill over to the short-term funding markets.
FSB also highlighted the rising security concerns in the cryptocurrency sector, including money laundering, ransomware, and cyber attacks. It adds that the lack of regulatory oversight was aggravating the matter.
The Financial Stability Board was formed by G20 after the 2008 financial crisis to assess the threats faced by the global economy.