Economic uncertainty amid geopolitical tensions, rising interest rates, and slowing economic growth have strained America’s financial system. In reaction to the huge losses recorded by traditional banks in the second quarter of 2022, The Federal Deposit Insurance Corporation (FDIC) decided to prioritize five key policies this year, including assessing the risks of crypto assets to the banking system.
Addressing the Senate Banking Committee at a recent hearing, Acting FDIC Chairman Martin J. Gruenberg highlighted the moderate decline in banks’ net income in the first and second quarters of 2022 due to an increase in loan balances and provision expenseswhile stating that no bank had failed in the last two years.
With banks reporting $470 billion in unrealized losses and the FDIC expecting this trend to continue, Gruenberg believes that banks should cautiously engage in crypto-asset activities. He acknowledged accelerating interest in crypto despite a bear market, while confirming the FDIC’s intent to better understand cryptocurrency risks with the help of banks:
“The FDIC will continue to work with our supervised banks to ensure that any crypto-asset-related activities they engage in are permissible banking activities that can be conducted in a safe and sound manner and in compliance with existing laws and regulations.”
This year, the FDIC issued cease and desist orders to cryptocurrency companies that made misleading statements to investors. and, in parallel, it reminded the insured banks of the risks that could arise related to such misleading statements.
In his written testimony, Gruenberg also mentioned the numerous collapses of the cryptocurrency ecosystem that have left investors without their funds. Also, highlighted the importance of stablecoins in trading various crypto assets and how federal financial regulators plan to carefully evaluate related policies.
“Nevertheless, The distributed ledger technology on which they (stablecoins) are built may prove to have significant applications and public utility within the payment system.”Gruenberg concluded.
On November 14, US President Joe Biden confirmed Gruenberg’s nomination to serve as FDIC Chairman for a five-year term.
Gruenberg has spent his career fighting for consumers and is well equipped to defend the banking system from new & existing threats.
Under his leadership, I am confident that the FDIC will work to ensure that banks serve the needs of American families, not just bank executives.
—Elizabeth Warren (@SenWarren) November 14, 2022
Gruenberg has spent his career fighting for consumers and is well equipped to defend the banking system against new and existing threats.
Under your leadership, I am confident that the FDIC will work to ensure that banks serve the needs of America’s families, not just bank executives.
Thanks to majority control of the Democratic party, Biden could see his choice pass without partisan obstruction.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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