A Warning Has Been Issued By US Banking Industry Regulator Against Crypto Risks

The Comptroller of the Currency (OCC), a banking industry regulator of the United States has recently issued a warning for the banks in the country.

The warning issued is for the banks to stay cautious and vigilant against the risks that are emerging due to the mass adoption of cryptocurrencies.

The reason behind the Worry

The OCC has been closely monitoring the cryptocurrency market situation and it is determined to take the right actions to bring the situation under control.

The regulatory authorities in the United States have remained very vigilant and strict about crypto adoption. Still, the level of adoption of cryptocurrencies in the United States has continued to rise.

The US is among the countries where crypto adoption is at the highest rates. With the crypto market situation becoming worse with every passing week, the regulators are worried for their investors.

The major concern is the overall economic condition in the United States which has every authority worried about the country’s future.

The economic pressure is still at large in the United States as the country is still finding it challenging to battle the rising inflation rates.

There is even a great threat of recession in the country if the inflation rates do not come under control and the interest rates keep on rising.

During these difficult times, the regulators want to make sure that the banks and the investors do not end up making bad investments.

In the year 2022 alone, the crypto industry has suffered from two major crashes. Both the crashes involving Terra and FTX have resulted in losses worth hundreds of billions.

As the United States locals are attracted to cryptocurrencies, it is important to alert them and issue necessary warnings so they are aware of the consequences.

They should know what they will end up losing if they face losses from their investments in cryptocurrencies.

This is where the banks come in to play a major role. For regulators, the top priority is saving the economy. They can save it by keeping their locals out of bad investments.

Therefore, the OCC has taken the step it feels is necessary to put a leash on the mass adoption of cryptocurrencies. If the adoption is inevitable, then at least the banks have to remain very cautious about it.

Warning Issued by the OCC

The latest warning issued by the OCC mainly addresses the banking institutions. This is because they are the ones responsible for executing most of the funds’ transfer requests launched by investors to the crypto firms.

While cautioning the banks about the rising risks from the crypto world, the regulator has asked the banks to go with a safe approach.

The regulator has asked the banks to seek guidance and permission from the regulators, and authorities before they engage with cryptocurrency entities.

It does not matter whether it is a cryptocurrency firm or cryptocurrencies, they must remain cautious at all costs.

Risks Mentioned by the OCC

In the warning, the OCC has made the firms aware of three major risks and concerns it has for the crypto world.

The first one is the unstable existence of stablecoins. As per the regulator, despite claiming the stablecoins are pegged to the dollar, incidents such as the de-pegging of TerraUSD (UST) have taken place.

Then comes the risk management part of the cryptocurrency industry that it lacks badly. According to the regulator, there is a great shortage of mature risk management practices in the industry.

Another major risk factor for the industry is being interconnected. According to the regulator, the entire crypto industry has proven to be very contagious when a single trading platform suffers a crash.

Talking about the risks and the concerns it has for cryptocurrencies, the OCC has advised the banks to be extra careful.

It has asked them to take multiple safety measures before they interact with crypto firms or cryptocurrencies.

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