A Crypto Warning From A US Banking Regulator Was Recently Released

The virtual crypto-money sphere is developing but has “now no better but robust” risk management, according to the Office of the Comptroller of the Currency (OCC).

A US bank-related governmental department informed finance organizations of the “rising hazards” of crypto and advised them to keep a “careful understanding” and, in some cases, look for approval before doing any financial operations with cryptocurrencies or cryptocurrency-related businesses. 

The need for a better understanding of risks

The OCC stressed what it claimed were “numerous main hazards” of cryptocurrency in the recent report, citing “dislocations” within the crypto market over 2022.

Its 3 key features are that “stable tokens can be unpredictable,” the cryptocurrency sphere needs better established risk-regulatory procedures, and there is a high-pitched danger of incidents because of the “excessive level of interconnections. 

The absence of “constant or absolute rules” in the area, the unpredictability of cryptocurrencies, the rise in businesses using cryptocurrencies and tokenized assets to provide “bank-like products and services,” and other issues have been brought up, according to the OCC, raising concerns about the stability of the economy.

The depeg and disintegration of the USTC programmed stable token this spring served as an illustration of the “run hazard” of stablecoins, and as a result, asset-subsidized tokens likewise experienced insignificant depeg activities. 

The possible hazards

Since then, stable tokens backups have developed a lot, but the majority “continue to be liable to run the risk, according to the report.

Regarding hazard regulation, the OCC noted that patterns at crypto-related companies have been developing but are “now no longer but unrefined,” with companies seeming to be “unready for the tensions and astonishments that have resulted in losses for hundreds of thousands of investors over the past 12 months, it added. 

Participants in the cryptocurrency market “might be taking part in relatively supplemented exchanging,” it was noted, contributing to the mentioned contagious risking activities.

The OCC stated that businesses seeing to work with cryptocurrency or related agencies “have to take a cautious and incremental approach.

National banks were advised by the OCC to discuss any plans involving cryptocurrencies “with their superordinate departments” before engaging in different actions, as some may need authorization. Following the financial collapse of FTX, crypto companies have taken steps to increase transparency.

Many exchanges have implemented PoR so that their clients can confirm the cryptocurrency backing, and some have even conducted open examinations.