Decrypting financial stability risks in crypto-asset markets

Lieven Hermans, Annalaura Ianiro, Urszula Kochanska, Veli-Matti Törmälehto, Anton van der Kraaij and Josep M. Vendrell Simón

Financial Stability Review, 2022, vol. 1

Abstract: The stellar growth, volatility and financial innovation currently seen in the crypto-asset ecosystem, as well as the rising involvement of institutional investors, show how important it is to gain a better understanding of the potential risks crypto-assets could pose to financial stability if trends continue on this trajectory. This special feature provides an update on crypto-asset market developments and a general overview of risks stemming from unbacked crypto-assets and decentralised finance, given the way in which they have evolved and their specific characteristics and risks. Systemic risk increases in line with the level of interconnectedness between crypto-assets and the traditional financial sector, the use of leverage and lending activity. It is important to close regulatory and data gaps in the crypto-assets ecosystem to mitigate such systemic risks. JEL Classification: G18, G19, G23, G28, G51

Keywords: crypto assets; crypto lending; financial stability risk; leverage (search for similar items in EconPapers)
Date: 2022-05
Note: 2568016
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:fsrart:2022:0001:2

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