The Federal Deposit Insurance Corporation (FDIC) released a report on Monday, focusing on the risk that digital assets pose to the financial stability of the United States. In its annually-published Risk Review, the FDIC dedicated a two page section to crypto, compared to the other 90 pages that address a range of topics.
The FDIC explained that they have become increasingly aware of the rising interest in crypto, and deemed that more information was needed to understand the associated risks. The organization identified fraud, legal uncertainties and immature risk management practices as some of the obscure areas.
Given the recent bank collapses in America, it is understandable that the FDIC, funded by banks paying a premium for deposit insurance, has become concerned about crypto. The interconnectedness of actors in the crypto market can concentrate risk for any banks that engage with it. Silvergate Bank and Signature Bank are two FDIC members that were pillars of crypto, but have since folded.
The FDIC noted that digital assets are unpredictable, making it difficult to assess their possible impact on the financial system. In addition, they are worried about the volatility of deposits, which can cause liquidity issues, and the instability of stablecoins which can lead to runs. The USDC stablecoin lost its dollar peg after Silicon Valley Bank closed in March.
Finally, the FDIC and Office of the Comptroller of the Currency issued a joint statement in January, urging banks to be cautious and comply with relevant laws when dealing with crypto-related activities.
