Systemic Risk Channels in Digital Finance: A Comprehensive Taxonomy

The rapid growth of decentralized finance (DeFi), centralized cryptocurrency platforms (CeFi), and stablecoin ecosystems has introduced novel channels of systemic risk that existing frameworks—developed for traditional, regulated financial institutions—are ill-equipped to capture. This paper develops the first comprehensive taxonomy of systemic risk transmission channels across all major segments of digital finance. Through a hybrid methodology combining systematic literature review, theoretical derivation, and crisis case evidence drawn from twenty-five episodes between 2009 and 2026, we identify eight distinct channels: (1) network contagion, (2) liquidity spirals, (3) stablecoin runs, (4) composability risk, (5) liquidation cascades, (6) counterparty concentration, (7) information asymmetry, and (8) fiat-crypto gateway risk. Two channels—composability risk and gateway risk—are classified as genuinely novel, with no meaningful analog in traditional finance. Four are hybrids that extend established mechanisms with significant digital-native features, and two are direct extensions of canonical financial theory. We document cross-channel interactions that produce compounding cascade dynamics, as demonstrated by the 2022 crisis sequence spanning Terra/Luna, Three Arrows Capital, Celsius, and FTX. An evolutionary analysis traces the development of the systemic risk landscape from the Mt. Gox era to the present, and a forward-looking assessment examines emerging risks from tokenized real-world assets, CBDC interoperability, and AI-driven trading. The taxonomy provides a unified analytical framework for researchers and regulators seeking to understand, measure, and mitigate systemic risk in digital finance.