Financial systems have typically evolved through a combination of innovation and crises. It tends to go like this: new technologies promise efficiency, but their risks become apparent under pressure. Over time, institutions, regulations and practices adapt.
Now, a growing body of research by global economists suggests that digital assets, and their underlying infrastructure, may be entering the same cycle. The results are in line with the risks that could come from integrating blockchain assets into the traditional financial system.
April a report For example, a representative of the International Monetary Fund (IMF) argued that moving financial services and payments across the chain does not represent incremental digitization but a “structural shift in the financial architecture,” a shift that could inadvertently remove the frictions that currently prevent financial crises from escalating.
The research does not dismiss the potential of blockchain technology. Instead, he emphasizes the importance of understanding its effects at the systemic level. In calm markets, the frictionless design of cryptocurrencies can promise efficiency. In tense markets, this may amplify instability.
And the IMF report is by no means alone in its conclusions about the potential impact that bringing blockchain and digital assets into the traditional financial sphere could have.
According to the recent results published by the US Federal Reserve,… Financial Action Task Force (FATF), the European Central Bank (ECB), and other global institutions, researchers appear keen to highlight the potential systemic risks of cryptocurrencies before any significant and irreversible pressures end up proving their point.
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See also: The shadow market for foreign stable currencies has become an issuance for corporate treasuries
Risks when trust moves from institutions to infrastructure
To understand the concerns surrounding cryptocurrencies, it helps to start with what blockchain-based systems do very well: they Time pressure. Settlements that used to take days are now being done in minutes or seconds, as intermediaries that used to perform layers of verification and delay are replaced by automated protocols. As a result, liquidity can move globally, continuously, and with minimal human intervention.
A research paper published in 2026 by economists in Federal Reserve Bank of New York Titled “Non-intermediation of stablecoins“studied how the movement in primary market activities of stablecoins became linked to the daily fluctuations of the reserve balances of partner banks, The ultimate find Stablecoins can transmit liquidity shocks to partner banks.
separate a report From the Federal Reserve Bank of New York,”Stablecoins vs. Token Deposits: Revisiting the Narrow Banking Debate“, found that unlike stablecoins, token deposits issued by banks can finance loans and investments, and link them Create money For credit expansion.
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This analysis recast stablecoins and token deposits not as competing payment instruments but as instruments with radically different consequences on the balance sheet. The choice between them affects liquidity strategy, exposure to counterparties, and ultimately the cost and availability of credit throughout the economy.
the European Central Bank (European Central Bank) called Close control of stable currencies in its region, and Reserve Bank of India Governor Sanjay Malhotra said in a speech last year that his organization – India’s central bank and banking regulator – “adopts a policy… Very careful Approach to cryptocurrencies, including stablecoins.
Elsewhere, in 2025 the Financial Stability Board (FSB) also announced plans to increase its focus on stablecoins, saying they could… pose risks in the global financial system.
However, since the beginning of 2026, global banks have become more systemically important Morgan StanleyYou’re already in Digital assets space.
See also: Stablecoin pilots continue to stall on their path to expansion
The range of risks being reported
In traditional finance, settlement frictions due to delays, intermediaries, jurisdictional barriers, etc. are often framed as inefficiency. But they also work as circuit breakers. Delays give institutions time to assess exposures, clearinghouses absorb shocks and trade risks, all while regulatory limits help slow the transmission of cross-border pressures.
In contrast, on-chain systems are designed to eliminate these features. Economists are now wondering whether this coupling, although efficient, reduces the system’s ability to absorb shocks.
March a report From the Financial Action Task Force entitled “Target report on stablecoins and non-hosted wallets,“For example, it highlighted the growing tension between technology’s promise of frictionless global payments and the risks posed by an ecosystem that remains only partially regulated.
the PYMNTS INTELLIGENCE And City Report”Chain Reaction: Regulatory Clarity as a Catalyst for Blockchain Adoption“It found that blockchain’s next leap will be shaped by regulation; and that evolving guidance is beginning to create the foundations for secure and scalable blockchain adoption. However, the report found that implementation challenges continue to complicate blockchain’s institutional and systemic progress.”
