According to a new report from the Organization for Economic Co-operation and Development (OECD), cryptocurrency As the industry becomes more closely linked to traditional finance, the next crypto crash could cause widespread financial instability.
OECD researchers have joined a growing chain of experts who argue that the industry focused on decentralized technology is heavily concentrated among a small group of respondents.
“A Future Cryptocurrency Collapse Could Cause General Financial Instability”
The researchers behind the report argue that the bankruptcies of these firms reveal the interconnectedness between companies in crypto. OECD experts point out that “if any of these dominant companies face challenges in the future, the risk of widespread disruption and crisis in the cryptocurrency asset markets will increase.”
Arguing that decentralized finance is more dependent on stock markets than some advocates say, the report describes centralized trading firms as “in many ways the lifeblood of DeFi” as they provide a source of funding and collateral for DeFi protocols.
The report is based on crypto lending firm Celsius, hedge fund Three Arrows Capital, which has made its mark in the cryptocurrency industry this year. bitcoin exchange focuses on the declines of FTX and stablecoin issuer TerraUSD. As of mid-June, crypto has lost $1.7 trillion compared to its market cap peak, according to OECD statistics.
The OECD is made up of representatives from 38 countries and regulates global economic standards. The reporting framework on crypto taxation influenced European Union legislation this month.
“If conditions change, similar turmoil in a larger crypto-asset market in the future could have ramifications for financial stability,” the report said.
The OECD claims there is an “urgent need for policy action”, particularly to protect individual investors from the “disproportionate impact” on them. This call echoes similar recommendations from other international institutions.
*Not investment advice.
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