The U.S. Financial Stability Oversight Board has identified stablecoins and cryptocurrencies as threats to the financial system

In the annual report Publish On Friday, the U.S. Financial Stability Supervisory Commission (FSOC) Stable coins and other digital assets.

Regarding stablecoins, FSOC stated that factors such as insufficient liquidity, lack of appropriate safeguards, opacity of redemption rights, and cyber attacks may weaken consumer confidence. The report stated: “A run on stablecoins under tight market conditions may magnify the impact on the economy and financial system.”

The report also reminded Decentralized finance, or DeFiWhen the price of the underlying asset falls, the use of high leverage may trigger a sell-off. This will lead to a cycle of margin calls and further declines in prices. In addition, the report outlines that “users of these services face the risk of loss due to risks such as market value fluctuations, operational issues, and cybersecurity threats.” In the report’s recommendations, FSOC calls on federal and state authorities to work together. Formulate Legislation on stable coins and digital currencies.

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Despite concerns about the unregulated nature of the crypto industry, the report Highlight their innovative potential:

“The development of digital assets and the use of related distributed ledger technologies may provide opportunities to promote the innovation and further modernization of financial infrastructure. Given the rapid development of the digital asset market, regulatory attention and coordination are essential.”