International credit rating agency Fitch Ratings has warned that it may reassess US banks with “significant” cryptocurrency exposure negatively.
“Stablecoin issuance, deposit tokenization and blockchain technology use give banks opportunities to improve customer service. They also let banks leverage blockchain speed and efficiency in areas such as payments and smart contracts,” Fitch said, adding:
“However, we may negatively re-assess the business models or risk profiles of U.S. banks with concentrated digital asset exposures.”
Fitch stated that while regulatory advancements in the US are paving the way for a safer cryptocurrency industry, banks still face several challenges when dealing with cryptocurrencies.
As such, Fitch’s downgrading the ratings of a bank with significant crypto exposure could result in lower investor confidence, higher borrowing costs and challenges to growth.
The report highlighted that several major banks, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, are involved in the crypto sector.
Fitch highlights systemic stablecoin risks
“Financial system risks could also increase if adoption of stablecoins expands, particularly if it reaches a level sufficient to influence the Treasury market.”
“High penetration of USD-linked stablecoins in particular can weaken monetary transmission, especially where pricing and settlement increasingly occur outside the domestic currency,” Moody’s said.
“This creates cryptoization pressures analogous to unofficial dollarization, but with greater opacity and less regulatory visibility,” it added.
