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The Office of the Comptroller of the Currency (OCC) said the integer plus manufacture was maturing but was “not yet robust” successful its hazard management.
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A United States banking manufacture regulator warned banks of the “emerging risks” of cryptocurrencies saying the assemblage should instrumentality a “cautious approach” and question support successful immoderate cases erstwhile engaging with crypto oregon crypto firms.
Citing “dislocations” successful the crypto market implicit 2022 the Office of the Comptroller of the Currency (OCC) highlighted what it said were “several cardinal risks” of crypto successful its Dec. 8 Semiannual Risk Perspective for Fall 2022 report.
Its 3 main concerns are that “stablecoins whitethorn beryllium unstable,” the crypto manufacture lacks mature hazard absorption practices and has a precocious hazard of contagion owed to the “high grade of interconnectedness.”
Check it out! The @USOCC reported the cardinal issues facing the national banking strategy successful its Semiannual Risk Perspective for Fall 2022. Read much astatine https://t.co/CcfoiQM8xe pic.twitter.com/0WnAt5psXU
— OCC (@USOCC) December 8, 2022The space’s deficiency of “consistent oregon broad regulation” and the volatility of crypto on with the accrued scope of firms offering “bank-like products and services” utilizing crypto and tokenized assets were besides cited arsenic concerns, which the OCC believes raises questions regarding fiscal stability.
The depeg and collapse of the TerraClassicUSD (USTC) algorithmic stablecoin successful May was fixed arsenic an illustration of stablecoins’ “run risk,” and however asset-backed stablecoins besides saw insignificant depeg events arsenic a result.
It highlighted stablecoin backings person “incrementally evolved” since, but believes astir “remain susceptible to tally risk.”
Discussing hazard absorption the OCC said practices astatine crypto firms were maturing but are “not yet robust” with firms appearing “unprepared for the stresses and surprises” implicit the past twelvemonth that saw losses for millions of investors, it added:
“Hacks and outages are frequent, and fraud and scams stay precocious passim the industry. In immoderate cases, ownership rights, custody arrangements, and fiscal representations person created a precocious grade of confusion.”The crypto marketplace implicit 2022 besides revealed the industry’s “interconnectedness [...] done a assortment of opaque lending and investing arrangements” according to the OCC.
Related: US lawmakers question national regulators connected banks' ties to crypto firms
It remarked crypto participants “may beryllium engaging successful highly leveraged trading” which resulted successful the noted contagion risk.
In its proposal to banks, the OCC said institutions considering engaging with crypto oregon crypto companies “should instrumentality a cautious and incremental approach.”
The OCC advised nationalist banks that crypto-related plans should beryllium discussed “with their supervisory office” earlier they prosecute successful immoderate activities arsenic immoderate perchance necessitate permission.
Crypto companies person moved to amended transparency successful the aftermath of the bankruptcy of FTX with galore exchanges introducing proof-of-reserves truthful users tin verify crypto backings on with immoderate conducting nationalist third-party audits.
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