Cryptocurrency Report from World Famous Credit Rating Agency! ”The Risks Are Increasing!”

Fitch Ratings, cryptocurrency He stated that the recent bankruptcies and stress related to their units create some risk situations.

Credit Rating Agency Fitch Ratings Highlights a Series of Risks to the Global Cryptocurrency Ecosystem That It Says Continues to Evolve

These include limited and diverse regulatory frameworks, extreme price fluctuations, increased legal complexities, counterparty risks, asset/liability concentrations and fraud.

He added that other risks are also becoming more apparent, such as counterparty concentrations, interdependence, and the valuation of crypto assets being held in a bankruptcy.

The lack of comprehensive regulation for cryptocurrencies serves to limit many of the channels through which they can penetrate the wider financial system.

Banks have so far been largely insulated from the effects, in part due to regulatory restrictions and bank capitalization.

However, some banks, such as Silvergate Bank and Signature Bank, had concentrations of deposits with crypto firms that used their networks to transact in cryptocurrencies.

This led to significant deposit outflows, resulting in significant business cuts. The speculative nature of cryptocurrencies and high price volatility have made the situation worse.

In January 2023, US bank regulators issued a joint statement stating that they are closely monitoring banks’ exposure to crypto-related activities, highlighting several risks.

While these actions do not go as far as establishing a formal regulatory framework for the industry, they can be effective in reining in excessive risk taking in the crypto ecosystem.

Stablecoins at the heart of decentralized finance could decline significantly if central banks issue digital currencies or stop issuing private stablecoins altogether.

This has already happened when the New York Department of Financial Services stopped the issuance of Binance Holding LTD’s BUSD stablecoin.

*Not investment advice.