Digital assets are one of the most significant developments impacting the financial services industry and will shape the future of digital transformation of the industry. Digital assets such as crypto-assets, stablecoins and decentralised finance (DeFi) have grown exponentially. Increased interest and investment by traditional financial sector players and institutional investors, coupled with increased supply of products and services providing access to crypto-asset risk, are transforming business models and risk profiles of traditional finance (TradFi). Growing participation of institutional investors in digital asset markets can give rise to investor risks at the micro-level, while it may also create channels of potential risk transmission between decentralised finance and traditional finance.
Given the multitude of potential risks involved in these growing markets for crypto-assets and DeFi, there is a role for policy makers to evaluate such risks and consider policy action to address them.
The OECD monitors the evolution of the market for digital assets and documents points of linkage to traditional finance and channels of risk transmission. Improved data collection and analysis of institutional investment in digital assets, as well as the scale of interconnectedness between the two environments, would improve policymakers’ understanding on the evolution of this market and its risks.