The latest financial stability report from the People’s Bank of China reveals a distinct section for crypto-assets.

According to the report released on Dec. 22, the strategic inclusion of this section aims to bridge data gaps, alleviate fragmentation, and eradicate regulatory arbitrage while addressing the role of the Financial Stability Board (FSB) in a comprehensive paragraph focusing on the regulation of crypto assets.

The report reveals that the cryptocurrency market constitutes 1% of the global financial system, emphasizing its relatively confined association with traditional finance while highlighting several potential risks associated with cryptocurrency regulatory arbitrage, citing concerns about susceptibility to hacker attacks, market manipulation, and defi governance mechanisms.

Notably, the report highlights specific instances, such as the Terra ecosystem collapse and the FTX exchange decline in 2022.

The news comes the same day the People’s Bank of China announced another stride forward in utilizing the country’s digital currency. According to the South China Morning Post, the Beijing-based commercial bank has successfully executed the inaugural cross-border settlement for precious metals trading using the digital yuan.

At the time, the Shanghai branch of the state-owned bank facilitated the settlement by transferring $14 million in cash from an international buyer and depositing these funds as digital yuan into an account held at the Shanghai Gold Exchange.