Cryptoassets represent a new competitive threat for traditional transactional services, with some variants (such as stablecoins) also potentially compromising deposit-taking activities as 17  See “Assessment of Risks to Financial Stability from Crypto-assets”. FSB (2021). 18  https://www.bde.es/f/webbde/Secciones/Publicaciones/InformesBoletinesRevistas/InformesEstabilidadFinancera/22/F SR_2022_1_ChE.pdf 19  This extends to all matters concerning compliance with the tax obligations associated with investing in these markets. With this in mind, Spain has announced new reporting obligations that are expected to enter into force in 2023. The treatment of such assets for the purposes of the various different taxes has to date been resolved in the form of requests for binding rulings from the Directorate General of Taxation. 20  See “Research Note: Cryptoasset consumer research 2021”. FCA (2021). 21  Specifically, even though half were University graduates, almost two thirds of the crypto-asset owners interviewed admitted to having limited or zero understanding of the most basic features of the associated risks and rights. See “Cryptoassets in Asia: consumer attitudes, behaviour and experiences”. OECD (2019). 22  See “Cryptic Connections: Spillovers between Crypto and Equity Markets”. Iyer, T. (2022), IMF Global Financial Stability Notes, No. 2022/01. 6  they intend to become a store of value. As highlighted in some recent papers, a disorderly disintermediation in the event of an accelerated substitution of bank deposits for such digital assets could ultimately affect the banking sector’s net financing capacity and lead to credit being rationed or becoming noticeably more expensive.

A second source of risk stems from the potential impact of crypto-assets on the smooth functioning of financial markets. Broadly speaking, wild swings in their prices may sway investor sentiment, triggering an overreaction that ends up influencing their behaviour in other markets. Equally, the need to respond to such volatility with frequent adjustments to the necessary collateral could precipitate sales of other asset classes. Indeed, the IMF has recently warned of a notable increase in the positive correlation between crypto-asset and capital markets, which has in certain cases increased by a factor of 35.22 These effects may be further aggravated in the event that alternatives such as stablecoin scale up. Specifically, an accumulation of redemption requests resulting from, for instance, widespread panic around such assets, could put money markets under strain and, by extension, spread to those institutions acting as custodians of the hedging assets. These problems can be exacerbated by certain emerging segments, for example decentralised finance or DeFi, which are highly leveraged and encourage feedback dynamics between unbacked cryptocurrencies and stablecoins. Further, these tensions could spill over into payment systems, as they would be forced to handle a very significant rise in transaction volumes that, in certain circumstances, could lead to delays in execution or even bring services to a standstill. A third source of vulnerability has to do with the impact on the banking sector.