A United States banking industry regulator warned banks of the “emerging risks” of cryptocurrencies saying the sector should take a “cautious approach” and seek permission in some cases when engaging with crypto or crypto firms.
Citing “dislocations” in the crypto market over 2022, the Office of the Controller of the Currency (OCC) highlighted what it said were “several key risks” of crypto in its Dec. 8 Semiannual Risk Perspective for Fall 2022 report.
Its three main concerns are that “stablecoins may be unstable,” the crypto industry lacks mature risk management practices and has a high risk of contagion due to the “high degree of interconnectedness.”
The space’s lack of “consistent or comprehensive regulation” and the volatility of crypto, along with the increased range of firms offering “bank-like products and services” using crypto and tokenized assets, were also cited as concerns, which the OCC believes raises questions regarding financial stability.
The depeg and collapse of the TerraUSD Classic (USTC) algorithmic stablecoin in May was given as an example of stablecoins’ “run risk,” and how asset-backed stablecoins also saw minor depeg events as a result.
It highlighted stablecoin backings have “incrementally evolved” since, but believes most “remain susceptible to run risk.”
Discussing risk management, the OCC said practices at crypto firms were maturing but are “not yet robust,” with firms appearing “unprepared for the stresses and surprises” over the past year that saw losses for millions of investors, it added:
“Hacks and outages are frequent, and fraud and scams remain high throughout the industry. In some cases, ownership rights, custody arrangements, and financial representations have created a high degree of confusion.”
The crypto market over 2022 also revealed the industry’s “interconnectedness [...] through a variety of opaque lending and investing arrangements,” according to the OCC.
It remarked crypto participants “may be engaging in highly leveraged trading” which resulted in the noted contagion risk.
In its advice to banks, the OCC said institutions considering engaging with crypto or crypto companies “should take a careful and incremental approach.”
The OCC advised national banks that crypto-related plans should be discussed “with their supervisory office” before they engage in any activities, as some potentially require permission.
Crypto companies have moved to improve transparency in the wake of the bankruptcy of FTX, with many exchanges introducing proof-of-reserves so users can verify crypto backings, along with some conducting public third-party audits.
The crypto market slump doesn’t mean interest in crypto is also down. A new study from the cryptocurrency education platform CryptoManiaks revealed that many countries are still scouring the internet, hungry for crypto-related information.
According to the study, the Netherlands and Turkey take the top two spots, with 8.2% and 5.5% of the population, respectively, searching for crypto-related terms. Turkey particularly accounted for 4.7 million searches, leading the searches with sheer numbers.
The study analyzed the combined number of searches for a select set of popular cryptocurrencies into a percentage of the population for each country in order to calculate the percentage of locals searching each month.
While it was in second for overall searches, Turkey came in first place for searches related to the memecoin Dogecoin, with 812,000 monthly searches. This is nearly double that of Ethereum
, the country’s third most searched crypto.
A spokesperson from CryptoManiaks commented on the DOGE curiosity, particularly over the last 12 month:
“Dogecoin’s popularity has surpassed that of Ethereum in a significant number of countries, with nearly 2 million more monthly searches worldwide for the coin.”
The cryptocurrency DOGE has remained a popular digital asset and crypto cultural phenomenon after it was adopted as the poster crypto for internet icon Elon Musk.
Some of the cryptocurrencies included in the search terms were Bitcoin, Solana, and Binance Coin, among others.
Following the Netherlands and Turkey in the ranks were Germany, Canda and the Czech Republic.
While the United States and the United Kingdom are major players in the global cryptocurrency industry, neither ranked in the top spots due to the number of searches equivalent to their population sizes. The U.S. ranked 15th with 1.9% of the population searching for these terms, while the U.K. takes the 12th spot with 2.6%.
Recent research from Cointelegraph also revealed that despite market conditions, major institutions still remain interested in the industry and continue to pour millions into crypto-related projects.
Crypto’s public enemy number one, Sam Bankman-Fried has missed a crucial deadline to confirm his appearance at an upcoming Senate Committee hearing.
The former FTX CEO missed a Thursday 5:00 pm ET on Dec. 8 deadline for responding to a Senate Banking Committee request that he testify at the Committee meeting on Dec. 14. This has set up the possibility of a congressional subpoena.
On Dec. 8, the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, Sherrod Brown, and ranking member of the Committee, Senator Pat Toomey, released a statement on the request.
“FTX’s collapse has caused real financial harm to consumers, and effects have spilled over into other parts of the crypto industry. The American people need answers about Sam Bankman-Fried’s misconduct at FTX,” they stated before adding:
“The Committee has requested that he testify at our upcoming hearing on FTX’s collapse, and will consider further action if he does not comply.”
According to the official Committee website, the hearing titled “Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers” will be webcast on Dec. 14.
So far, two witnesses have been confirmed to attend the hearing — including American University Washington College of Law professor Hilary J. Allen and actor and author Ben McKenzie Schenkkan.
Allen is an academic whose research focuses on the impact of new financial technologies on the stability of the financial system. Schenkkan is an anti-crypto actor-turned-commentator who played a troubled teenager on a U.S. television series called “The O.C.”
Messari founder Ryan Selkis commented on the futility of the witness selection.
Meanwhile, Cointelegraph has reached out to Schenkkan for comment but did not receive a response at the time of publication.
Other than the Dec. 14 Senate Banking Committee hearing, Bankman-Fried has also been requested to attend a separate hearing called “Investigating the Collapse of FTX” on Dec. 13 with the U.S. House Financial Services Committee.
Bankman-Fried was first requested to attend the hearing via a tweet from Congresswoman Maxine Waters but seemingly declined the invitation on Dec. 5, stating that he wasn’t sure what would happen by the hearing date, “but when it does, I will testify.”
Waters responded on Dec. 8 stating “a subpoena is definitely on the table” should Bankman-Fried fail to voluntarily testify at the hearing.
The collapse of SBF’s FTX empire has initiated a tsunami of backlash from U.S. lawmakers and regulators threatening to drown the fledgling crypto asset industry.
This Daily Dose was brought to you by Cointelegraph.