The fast-evolving nature of crypto assets, scale, as well as structural vulnerabilities and “increasing interconnectedness” with the traditional financial system could threaten global financial stability, the FSB warned. The international nature of crypto markets “also raise the potential for regulatory gaps, fragmentation or arbitrage,” according to the report.

While the nature and use of crypto assets varies across jurisdictions, financial stability risks could rapidly escalate, the FSB said in the report, adding that there is a need for an evaluation of possible policy responses.

The FSB acknowledged there are significant data gaps impeding risk assessments of crypto assets, due to trading and lending platforms falling outside of regulatory boundaries and reporting requirements. The FSB also warned that crypto asset participants, products and markets “may be failing to comply with applicable laws and regulations.” Read the report.