International credit rating agency Fitch Ratings has warned of a potential negative reassessment of U.S. banks with "significant" exposure to cryptocurrencies.
According to a report released on Sunday, Fitch Ratings believes that while crypto integration can enhance fees, revenues, and efficiency, it also brings "reputational, liquidity, operational, and compliance" risks to banks.
Fitch Ratings stated, adding:
Fitch Ratings noted that despite regulatory progress in the U.S. paving the way for a safer cryptocurrency industry, banks still face multiple challenges when dealing with cryptocurrencies.
Fitch Ratings stated:
Fitch Ratings is ranked alongside Moody's and S&P Global Ratings as one of the "Big Three" credit rating agencies in the U.S.
The ratings provided by these agencies— which may spark controversy— hold significant influence in the financial sector and can affect corporate perceptions of economic viability and investment pathways.
As a result, a downgrade of a bank with significant crypto exposure by Fitch could lead to decreased investor confidence, increased borrowing costs, and hindered growth.
The report pointed out that several large banks, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, are involved in the crypto space.
Fitch believes that another risk may stem from the explosive growth of the stablecoin market, especially when its scale is sufficient to impact other sectors and institutions.
Moody's also highlighted the potential systemic risks of stablecoins in a report at the end of September, suggesting that widespread adoption of stablecoins in the U.S. could ultimately threaten the legitimacy of the dollar.
"The high penetration of stablecoins pegged to the dollar could weaken monetary transmission, especially as pricing and settlement increasingly occur outside of domestic currency," Moody's stated.
"This could create cryptoization pressures similar to unofficial dollarization, but with lower transparency and worse regulatory visibility," it added.
Related: Coinbase states that Bitcoin (BTC) is expected to recover in December due to 'macro tailwinds' and Fed rate cuts.
Original: “Fitch Ratings Warns of Risks for U.S. Banks with High Crypto Exposure”
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