DNB boss Klaasknot warns: ‘Crypto is in danger of becoming a huge danger’

The rise of stablecoins and crypto-etfs is increasingly part of the traditional financial system. According to Klaas Knot, chairman of the Financial Stability Board and divorcing president of De Nederlandsche Bank, that entails new risks.

Stablecoins have more and more government bonds

In an interview prior to his departure as a supervisor, Knot expressed his concerns about the rapid growth of Stablecoins. More and more of these digital coins are being covered by US government bonds. “We have to keep a close eye on that,” he says.

Stablecoins are linked to stable assets such as the dollar or bonds. That makes them less volatile, but according to Knot also potentially dangerous. “We thought for a long time that Crypto was not a danger to the system, but we may come back to that.”

Interdependence with financial markets is growing

Not only bun sounds alarm. In a report, the European Central Bank also mentions the growing influence of crypto worrying. According to the ECB, Stablecoins and other digital assets are increasingly closely intertwined with traditional markets. This increases the risk of shocks in the financial system.

The Genius Act is now on the table in the United States. That law must set clear rules for Stablecoins. The fear is that, if investors suddenly get out of en masse, publishers of Stablecoins are forced to sell government bonds. This can lead to unrest on the bond market and fluctuations in the interest.

Crypto-ETFs lower threshold for investors

According to Knot, crypto-etfs are also a risk. These investment funds make it easy for ordinary investors to get into crypto, without the need for knowledge of wallets or private keys. “The threshold is now much lower,” says Knot. “As a result, the link with the traditional system is growing rapidly.”

According to experts, the danger is not necessarily in technology, but in how quickly everything changes. Knot concludes with a warning: “Crypto will continue to develop. That also applies to the rules that we must apply to it.”