{"id":49226,"date":"2023-08-16T14:11:38","date_gmt":"2023-08-16T18:11:38","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/crypto\/fdics-annual-risk-report-embraces-crypto-as-a-significant-banking-concern\/"},"modified":"2023-08-16T14:11:40","modified_gmt":"2023-08-16T18:11:40","slug":"fdics-annual-risk-report-embraces-crypto-as-a-significant-banking-concern","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=49226","title":{"rendered":"FDIC’s Annual Risk Report Embraces Crypto as a Significant Banking Concern"},"content":{"rendered":"
\n

Crypto assets present \u201cnovel and complex risks\u201d to the banking sector that are \u201cdifficult to fully assess,\u201d according to the Federal Deposit Insurance Corporation (FDIC)\u2019s 2023 Risk Review for the banking sector.<\/p>\n

The report \u2013 published earlier this month \u2013 named \u201ccrypto-asset risk\u201d among five categories of risk banks are faced with today. The others include credit risk, market risk, operational risk, and climate-related financial risk.<\/p>\n

\u201cCrypto-asset risk, a new section in the 2023 Risk Review, discusses the FDIC\u2019s approach to understanding and evaluating crypto-asset-related markets and activities,\u201d wrote the FDIC. \u201cMonitoring these risks is among the FDIC\u2019s top priorities.\u201d<\/p>\n

According to the agency, assessing crypto asset risk can be difficult due to the \u201cdynamic\u201d nature\u201d and \u201crapid pace of innovation\u201d within the industry.<\/p>\n

That said, a few key risks come to mind: fraud, legal uncertainties, \u201cmisleading\u201d representations of disclosures, and immature risk management practices, to name a few. It added:<\/p>\n

\n

\u201cPossible contagion risk within the crypto-asset sector resulting from interconnections among certain crypto-asset participants may present concentration risks for banks with exposure to the crypto-asset sector.\u201d<\/p>\n<\/blockquote>\n

Contagion was a key factor in triggering a string of crypto industry blowups in 2022. The unwinding of Terra in May, for example, led to the downfall of crypto hedge fund Three Arrows Capital, and crypto lenders like Celsius and Voyager quickly followed.<\/p>\n

FTX\u2019s collapse later in the year sent shockwaves throughout the industry, causing more crypto lenders like BlockFi and Genesis to declare bankruptcy.<\/p>\n

Stablecoin Risk, According to FDIC<\/h2>\n

The FDIC noted \u201cstablecoin run\u201d risk as another issue, given that they can create the potential for deposit outflows for banks that hold stablecoin reserves.\u201d Stablecoins are blockchain-based tokens pegged to relatively \u201cstable\u201d assets, such as the U.S. dollar, and are commonly used for peer to peer payments and decentralized finance.<\/p>\n

The Federal Reserve also cautioned banks about various dangers related to the crypto market in February. Like the FDIC, it noted how \u201cinterconnectedness\u201d between deposits of certain crypto entities could create liquidity risks, and how stablecoin-related deposits can be subject to rapid outflows.<\/p>\n

That said, an ex-Fed policy analyst published a report in July arguing that stablecoins present less run risk than traditional bank deposits, due to the more strict composition of stablecoin reserves.\u00a0
\u00a0<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Crypto assets present \u201cnovel and complex risks\u201d to the banking sector that are \u201cdifficult to fully assess,\u201d according to the Federal Deposit Insurance Corporation (FDIC)\u2019s 2023 Risk Review for the banking sector. The report \u2013 published earlier this month \u2013 named \u201ccrypto-asset risk\u201d among five categories of risk banks are faced with today. The others […]<\/p>\n","protected":false},"author":1,"featured_media":49227,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[243],"tags":[83],"class_list":["post-49226","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crypto","tag-featured"],"yoast_head":"\nFDIC's Annual Risk Report Embraces Crypto as a Significant Banking Concern | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Crypto assets present \u201cnovel and complex risks\u201d to the banking sector that are \u201cdifficult to fully assess,\u201d according to the Federal Deposit Insurance\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=49226\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" 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