Fitch Ratings | Crypto

Fitch said sharp Bitcoin price swings could quickly erode collateral backing these securities, increasing the risk of losses for lenders and investors. Credit rating company Fitch Ratings has flagged a high degree of risk associated with Bitcoin-backed securities, a warning that could complicate the expansion of crypto-linked credit products among institutional investors. In a Monday assessment, Fitch said Bitcoin-backed securities, financial instruments typically structured by pooling Bitcoin (BTC) or Bitcoin-linked assets and issuing debt against that collateral, carry “heightened risks” that “are consistent with speculative-grade credit profiles.” The agency said such characteristics could place the products in speculative-grade territory, a designation associated with weaker credit quality and a higher likelihood of losses. Read more

While crypto offers banks an opportunity to generate new sources of revenue, Fitch warns it could bring risks that could lead to rating revisions. International credit rating agency Fitch Ratings has warned that it may reassess US banks with “significant” cryptocurrency exposure negatively.  In a report posted on Sunday, Fitch Ratings argued that while crypto integrations can boost fees, yields and efficiency, they also pose “reputational, liquidity, operational and compliance” risks for banks.  “Stablecoin issuance, deposit tokenization and blockchain technology use give banks opportunities to improve customer service. They also let banks leverage blockchain speed and efficiency in areas such as payments and smart contracts,” Fitch said, adding:  Read more