The Office of the Comptroller of the Currency (OCC) said digital assets could enhance the functionality of financial services, but warned banks about the risks.
The OCC has published a Risk Outlook Report that analyzes how cryptocurrencies can interact with the banking sector. Distributed ledger technology and digital assets, including stablecoins, could enhance the functionality of financial services, according to the report.
That being said, banks and other regulated institutions should consult with their supervisor, OCC, before they start offering any services in the cryptocurrency sector. These services may include storage, offering of derivative products, and access to third party cryptocurrency products.
According to OSS, the use of cryptocurrencies implies a sufficient level of knowledge and experience in relation to the main products, services and processes to identify and address strategic, operational, regulatory and reputational risks. The report says:
“Sound risk management associated with offering cryptocurrency products and services includes aligning these activities with the bank’s strategic objectives, risk appetite, resources and expertise.”
The OSS warns that while cryptocurrencies can open up opportunities for the banking sector, it is important to understand the risks associated with this new asset class. In 2022, the OCC intends to provide banks with additional guidance on how exactly they can engage in cryptocurrency activities.
Recall that in November, the OSS clarified how the cryptocurrency activities of national banks and federal savings associations in the United States will be regulated. In addition, at the beginning of last month, the OSS advocated tightening the law on the regulation of stablecoins.
In September, OSS director Michael Hsu said the DeFi industry could trigger an economic meltdown similar to the 2008 international financial crisis.