It could also put collateral markets under strain, undermine bank customer loyalty and know-your-customer standards and potentially prompt greater risk-taking by deposit institutions. Moreover, any rise in banks’ direct and indirect exposure to crypto-assets would also increase both their financial and reputational risks23. While currently limited, exposures relating to the provision of ancillary services to the distribution of third-party products or as a result of providing support to clients operating in the crypto sphere are on the rise. Fourth, the potential consolidation of crypto-assets as an alternative payment method threatens to create parallel value transfer systems. For as long as such assets fall out of the scope of central bank oversight, they will be hard pressed to contain the emergence of possible systemic risks. In certain circumstances (particularly in emerging markets), there may be even a risk of what is known as “cryptoisation”: i.e. the replacement of the national currency and other financial assets denominated in that currency with a crypto alternative.24 Among other aspects, such circumstance can compromise a country’s monetary autonomy and undermine the ability to exercise effective control over international capital movements.25 Fifth, we should also be mindful that some crypto-assets could increase the financial sector’s climate transition risk, given that some of the underlying consensus mechanisms require a significantly greater amount of energy than traditional financial market infrastructures. To put this more clearly, proof-of-work associated crypto-assets currently account for around 80% of the total capitalisation value.

For example, a card-based payment ecosystem can process around 65,000 transactions per second, while blockchains such as the one underpinning bitcoin do not usually support more than seven in their most basic configuration.27 Finally, their decentralised governance together with the realization of potential cyber threats could give rise to instances of fraud that end up compromising agents’ confidence both in digital assets and in other areas of the ecosystem. The consequences of such a scenario would be compounded owing to the lack of safeguards protecting customers’ interests and property rights. Given its potential scope, this scenario could become a serious problem. For example, a recent Chainalysis study shows that up to $ billion was stolen from digital wallets and platforms during the first quarter of 2022. Nearly three-quarters of said amount pertain to DeFi activity, a rise of 72% compared with the previous year.28 Bearing in mind there are an estimated 200-300 million crypto-asset users across the world, it is fair to call this a nonnegligible impact.29  The regulatory response In view of the extent of the challenges I have outlined, a number of regulatory initiatives are taking shape. It combines public warnings on the risks of buying and/or holding virtual currencies, and both national and international regulatory initiatives that are of the most importance, given the global nature of crypto-assets. Regarding the international initiatives, what started out with the regular monitoring of such initiatives became, in 2020 and at the behest of the G20, a multilateral regulatory response from the FSB30.