Warning of Banking regulator crypto Company
2022.12.09 00:33
Warning of Banking regulator crypto Company
Budrigannews.com – A regulator of the banking industry in the United States issued a warning to banks about the “emerging risks” posed by cryptocurrencies, advising them to “take a cautious approach” and occasionally seek permission before interacting with crypto or crypto firms.
In its Semiannual Risk Perspective for Fall 2022 report released on December 8, the Office of the Comptroller of the Currency (OCC) highlighted what it referred to as “several key risks” associated with cryptocurrency, citing “dislocations” in the market over the course of 2022.
“Stablecoins may be unstable,” “the crypto industry lacks mature risk management practices,” and “the high degree of interconnectedness” pose the three main concerns.
Check it out! The @USOCC reported the key issues facing the federal banking system in its Semiannual Risk Perspective for Fall 2022. Read more at pic.twitter.com/0WnAt5psXU
— OCC (@USOCC) December 8, 2022
The OCC believes that the increased number of businesses offering “bank-like products and services” using crypto and tokenized assets, in addition to the lack of “consistent or comprehensive regulation” in the sector and the volatility of crypto, raises concerns regarding financial stability.
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As an illustration of stablecoins’ “run risk,” the depeg and collapse of the TerraClassicUSD (USTC) algorithmic stablecoin in May was cited, as was the fact that asset-backed stablecoins also experienced minor depeg events as a result.
It featured stablecoin support have “steadily advanced” since, yet accepts most “stay helpless to run risk.”
Concerning risk management, the OCC stated that crypto firm practices were maturing but were “not yet robust,” and that firms appeared “unprepared for the stresses and surprises” that resulted in losses for millions of investors over the past year.
“Hacks and outages are frequent, and fraud and scams remain high throughout the industry. In some cases, ownership rights, custody arrangements, and financial representations have created a high degree of confusion.”
The OCC says that the crypto market in 2022 also showed the industry’s “interconnectedness” “through a variety of opaque lending and investing arrangements.”
It said that crypto traders “may be engaging in highly leveraged trading,” which led to the contagion risk that was mentioned.
The OCC advised banks to “take a careful and incremental approach” when considering engaging with crypto or crypto companies.
The OCC advised national banks that they should talk about crypto-related plans “with their supervisory office” before doing anything because some of them might need permission.
After FTX’s bankruptcy, crypto companies have taken steps to increase transparency. Many exchanges have implemented proof-of-reserves so that users can verify crypto backings and some have conducted public third-party transactions.
