At the Federal Reserve's meeting last month, cryptocurrency was on the agenda

Top Federal Reserve officials are so worried about the financial system's potential threat from cryptocurrency that they addressed it at a key monthly closed-door meeting in July.

According to the minutes of the Federal Open Market Committee meeting on July 27-28, “some participants highlighted different possible threats to financial stability, including concerns connected with increased usage of cryptocurrencies” (FOMC). This is the monetary policy-making panel of the Federal Reserve of the United States, and the interest-rate choices released following its monthly meetings are the topic of considerable astrology and Kremlinology (in the figurative sense).

While officials from the Federal Reserve Board in Washington and regional Fed banks have voiced a variety of opinions on cryptocurrency in recent months, ranging from positive to negative, this seems to be the first time the subject has come up in the FOMC.

As a result, it's another another indication that the sector has "arrived," after its involvement in delaying Congress's $1 trillion infrastructure package.

The minutes, which were released on Wednesday, did not specify which members of the 11-member committee raised these concerns.

According to the minutes, a few authorities also mentioned the necessity for stablecoin regulation.

According to the minutes, the officials discussed the “fragility and lack of transparency connected with stablecoins, the significance of carefully monitoring them, and the necessity to create an adequate regulatory framework to handle any financial stability concerns associated with such products.”

While the document does not go into detail, one reason FOMC members might be concerned is the investments made by stablecoin issuers, which are supposed to be redeemable 1:1 with dollars, and the risk of a sell-off in the underlying assets if these companies are hit with a large number of redemption requests at the same time.

“There's mounting evidence that [stablecoins] are significant participants in the commercial paper market, functioning similarly to unregulated money market funds—which aren't even stable,” according to the report. Steven Kelly is a research associate at Yale's Program on Financial Stability, which aims to explain financial crises.