Fitch Ratings has issued a warning about a possible negative revision in the credit ratings of US banks due to their deep investments in cryptocurrencies. The report highlights that while integrating cryptocurrencies can boost banks’ fees, profits, and performance, it also exposes them to risks related to reputation, liquidity, operations, and regulatory compliance. Innovations such as stablecoins, deposit tokenization, blockchain-based payments, and smart contracts offer new opportunities for banks but come with inherent risks.
Fitch noted that US regulatory measures have helped enhance the safety of the crypto industry; however, challenges remain from cryptocurrency price volatility, anonymity of digital asset holders, and risks of asset loss or theft. Without addressing these issues, generating earnings and business benefits from crypto activities is not feasible. Fitch Ratings, alongside Moody’s and S&P Global Ratings, plays a vital role in the US financial system, and any downgrade in ratings could impair banks’ investment capacity, increase borrowing costs, and hinder growth.
The report identifies major banks such as JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo as active players in the crypto sector. Fitch also expressed concerns over systemic risks arising from the rapid growth of the stablecoin market, especially if it expands enough to impact other financial sectors and institutions, potentially increasing pressure on the Treasury market.
A recent Moody’s report echoed similar worries, suggesting that widespread adoption of stablecoins could affect the status of the US dollar. Moody’s explained that pricing and settlement in foreign currencies create informal dollarization effects within the financial system but with reduced transparency and regulatory oversight, posing challenges to financial stability.
These concerns underscore the growing role of cryptocurrencies in the US banking sector and their potential financial implications, prompting banks to reconsider their business strategies and risk profiles.
Source: binance
