Aug 16, 2023

The Federal Deposit Insurance Corp. officially added crypto to its annual report on risks facing U.S. banks and says the agency is prepared to engage in “robust supervisory discussions” with the depository institutions it oversees.

Video transcript

The FDIC the US Federal Deposit Insurance Corporation added crypto as one of five broad categories this year in an annual risk report, a snapshot of the dangers the banking regulator considers a top priority at the moment while not adding any language specifically towards any certain Cryptocurrency. They did warn that Cryptocurrency itself is more a generalized risk and they also push for most banks to not hold any digital assets or have exposure towards them. I think this is just a broader acknowledgement that crypto is part of the banking system now and you got to be careful with it. Of course, in February and March, we had three banking institutions with crypto exposure collapse. So I'm sure this had a little bit to do with that, Jen. I think this makes sense, right. This is the first risk review that they've published since the banking collapse in March. And so I think you're right will. They had to say a lot of these things, they pointed to some of the risks including fraud, legal uncertainties, misleading or inaccurate representations and disclosures, risk management practices exhibiting a lack of maturity and robustness. I don't think that they're right um and I think that banks that want to get into crypto probably already know this. Um and are already considering it. I think the most interesting part for me is um they said that they identified I'm just looking for the number here. Yeah. According to the 2023 report, the FDIC has taken action against more than 85 entities that had misrepresented the extent of their FDIC coverage. I would love to see who those entities are. I know that there was a lot of talk about Voyager misrepresenting their FDIC coverage for consumers. And so I want to know um the 85 entities that they went after and where they are now because they all know what happened to Voyager. What do you think, Wendy? I actually, I made a video about this yesterday. I posted it on X and on youtube and on tiktok. Um but I just absolutely think it is insane that they're calling something without regulations a top five threat to the banking industry. And the reason why we don't have regulations is because it's the public servant. So how can this be a risk if there are no reg and we don't even know what the stuff is classified as it does. Like one plus one equals 69 here to me. I think it's absolutely ridiculous. But again, this also does prove just because you have laws and regulations governing something, it doesn't mean that it's still safe and this can be displayed in the current banking sector. We have all these laws and regulations, but that didn't stop 2008. It didn't stop the banking collapse that we just saw recently and it didn't stop the banks from taking your money and investing it really not being super transparent about it and charging you these obscure interest rates like those are, that's still there. That's, that's all legal. And I don't think that that's safe in any way, shape or form. I actually think that causes a direct risk and it should be kind of considered considering we're over what like $1 trillion in credit card debt and the average interest rate to pay that back, it starts at 20%. I think the stable coin thing is really what this boils down to, right? Like exposure to, right? These, these digital dollars that ride across like various blockchains, right? Those those actual dollars sit in the bank somewhere, right? And there are several large regional banks that have taken this upon themselves as a growing business line, right? I think Circle has something like a billion dollars in reserves sitting at customers bank. Those are the dollars that back up the US DC, that's, you know, sloshing around on, on the internet. So I think that part is the part that is interesting and potentially dangerous about this, right? Um If you force these us regulated stable coin issuers to seek banking relationships elsewhere I think that's ultimately bad for the stale coin uh system and ultimately bad for consumers as a whole. Right, because you're potentially entering into more risky sort of banking regulation requirements that will not serve, you know, us consumer interests if that's indeed what this is looking to serve. So I think the stable coin part of this, the exposure to part of this and again, those dollar reserves that are backing a lot of these digital dollars that, that I think is really quite interesting and will um you know, probably have ramifications for how these banks. Uh again these big regional banks go about uh doing this business line. So that, that to me is the thing that I just wanted to highlight, but I don't know. Well, maybe you have other thoughts. No, I think you're spot on here like stable coins are new staple coins are useful. It's one of the most uh utility impactful like crypto assets that are out there. And so I think that's why the banking structure is trying to like, respond to this and you don't destroy three of the largest banks in us history in a few months without some repercussions and crypto, I don't think had a lot to do that with that. I think these institutions were just servicing crypto companies, but regulators certainly may not see it that way. So there's going to be repercussions that there always are. It's always repercussions. Yeah, for every action or reaction and on and on. It's so crazy anyway. It just really makes you think.

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