OMM Newsroom
A sharp fall in cryptocurrency prices does not directly affect the pounds, dollars and euros in ordinary people’s bank accounts. However, as links between digital assets and the traditional financial system grow stronger, the risk of indirect effects increases. The issue has resurfaced after about $6.3 billion was stolen from the Binance exchange, AnewZ reports.
Blockchain analysis firms have linked the attack to a North Korean group. Binance said it would cover all the losses. Bitcoin nevertheless fell by more than 4% amid the impact of the attack on the cryptocurrency market.
A fall in bitcoin does not change the value of the dollar. Fiat currencies are backed by governments and central banks; their value is affected by factors such as interest rates, inflation and confidence in a country’s economy.
Cryptocurrencies still account for a relatively small share of the global financial system. The European Central Bank (ECB) warned in 2022 that extensive exposure to crypto assets among banks and other financial institutions could put capital at risk and harm investor confidence, lending and financial markets.
How can a crypto market downturn spread to traditional finance?
One risk involves borrowing. Many traders buy cryptocurrencies with borrowed money. When prices fall, lenders may demand repayment and positions may be forcibly sold. This can push prices down further. The ECB has said the high leverage offered by crypto exchanges increases risks to financial stability.
Another risk is the exposure of banks and investors to crypto assets. If banks, hedge funds or pension funds hold cryptocurrencies and related products, large losses could erode their capital.
More than $2 trillion in value was wiped out in the 2022 crypto market crash. The Bank of England said at the time that overall financial stability was not under threat, but warned that risks would grow as cryptocurrencies became more closely linked to the wider financial system.
A third channel is changes in household wealth. According to a survey cited by the ECB, one in 10 eurozone households has bought cryptocurrency. Large losses could reduce people’s spending; the effect on the wider economy would depend on crypto assets’ share of their total wealth.
Stablecoins are a key concern
The main concern is usually stablecoins, which are typically pegged to the US dollar and designed to maintain a stable value. Although they are presented as a relatively stable part of the crypto market, the collapse of TerraUSD in 2022 showed that the label does not always guarantee reliability. In the turmoil that followed, Tether, the largest stablecoin, came under pressure and temporarily lost its dollar peg.
The International Monetary Fund (IMF) said in October 2025 that the stablecoin market had reached about $305 billion and warned that a loss of confidence could trigger a liquidity crisis. The fund also highlighted an episode in which Ethena’s USDe token temporarily lost its stability during a sharp sell-off, falling as low as $0.65.
In the IMF’s view, widespread use of stablecoins could limit central banks’ ability to manage liquidity and control inflation, weakening the impact of monetary policy. In some economies, this could result in a loss of monetary sovereignty.
Regulators differ in their assessments of the scale of the threat a crypto market collapse poses to the financial system and the wider economy. The ECB has called for existing stablecoins to be urgently brought within a regulatory framework. Several major banks are exploring the creation of fully backed digital currencies. This could make stablecoins safer while also tying them more closely to the traditional financial system.
A crypto market crash does not, by itself, reduce the value of the dollar. The main risks lie in the links between borrowing, banks’ exposure to crypto assets and stablecoins backed by traditional assets. As these links grow, so does the likelihood that shocks in the crypto market will spread to the wider economy.
