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Major United States banking regulator has issued a warning to banks of the associated risks that cryptocurrencies bring. According to the Office of the Comptroller of the Currency (OCC), the banking industry overall should be cautious when it comes to digital currencies and cryptos and should look for regulatory permission before engaging with the blockchain-based industry.
The OCC listed “key risks” associated with the digital assets industry in the federal banking system in a report. According to the report, several issues are at play, with instability in the crypto industry which has the potential to impact the national currency, with stablecoins posing the biggest risk in this.
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 https://t.co/CcfoiQM8xe pic.twitter.com/0WnAt5psXU
— OCC (@USOCC) December 8, 2022
Additionally, the OCC noted that operation risk with cyber currencies involved is heightened:
“Operational risk is elevated. Cyber threats continue to evolve, with threat actors continuing to target the financial services industry with ransomware and other attacks… 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.””
According to the OCC’s report, the lack of comprehensive regulation along with the volatility in cryptocurrency, including Bitcoin, is suggested to possibly threaten the financial stability with more companies looking to crypto as a payments solution. Crypto and tokenised assets in the metaverse, with users buying and investing in digital assets also is a cause for concern for the banking regulator as they are bank-like products and services which are not sitting under the same standardised legislation as other asset classes.
The report also noted that some risks might not be present as the digital assets and potential within the crypto space are still emerging:
“Although crypto-asset products and services may share some risks with traditional products and services, risks may manifest in novel ways due to the market structure and underlying technology.”