Fitch: May downgrade US banks with high crypto exposure, warns of systemic risks from stablecoin expansion

Odaily Planet Daily news: International rating agency Fitch Ratings stated that if US banks have “significant and concentrated” exposure in the crypto sector, their business models or risk profiles could be negatively reassessed. Fitch pointed out that crypto integration can boost fees, yields, and efficiency, but also brings reputational, liquidity, operational, and compliance risks. Fitch stated that while stablecoin issuance, deposit tokenization, and on-chain technology can improve services and enhance payment efficiency, banks still need to properly address challenges such as crypto price volatility, on-chain anonymity, and asset security. If risks are not adequately managed, credit rating downgrades could lead to higher financing costs, reduced investor confidence, and impact institutional development. The report also mentioned that several large banks have already entered crypto-related businesses, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. Meanwhile, Fitch specifically warned about the potential systemic impact of stablecoins, stating that if their scale expands enough to affect the US Treasury market, it would bring additional financial stability risks. Another rating agency, Moody’s, previously pointed out that large-scale adoption of stablecoins could weaken the dollar’s monetary transmission mechanism, create pressures similar to “informal dollarization,” and increase regulatory challenges due to less transparent on-chain settlements. (Cointelegraph)