In its Semiannual Risk Perspective for Fall 2022 report, the Office of the Comptroller of the Currency (OCC) warned banks of the emerging risks of cryptocurrencies, saying the sector should be cautious and seek permission in some cases when engaging with crypto or crypto firms.
Its three primary worries are that stablecoins may be unstable, that the crypto companies lack mature risk management techniques, and that the crypto industry faces a significant risk of contagion owing to its high degree of interconnection.
The depeg and collapse of the TerraUSD Classic (USTC) algorithmic stablecoin in May was cited as an example of stablecoin run risk, as were lesser depeg incidents in asset-backed stablecoins.
It noted that stablecoin backings have gradually improved since then but that most are still vulnerable to running the risk.
The OCC advised banks to take a cautious and gradual approach when dealing with cryptocurrency or cryptocurrency firms.
As Coincu reported, following FTX‘s collapse, crypto companies have attempted to increase transparency, with several exchanges implementing proof-of-reserves so consumers can check crypto backings and others undertaking public third-party audits.
The OCC advised national banks that before engaging in any crypto-related activities, they should consult with their supervisory office, as some may require permission.
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