Risks and Opportunities in Digital Asset Services
Credit-rating agency Fitch Ratings is raising concerns over U.S. banks that have rapidly expanded into cryptocurrency and digital-asset services, warning that what may seem like lucrative opportunities could carry significant risks for individual banks and the broader financial system.
According to a report posted by the agency, Fitch Ratings maintained that although crypto integrations, which have the potential to increase fees, yields, and efficiency, bring “reputational, liquidity, operational, and compliance” benefits, they are generally risky for banks.
U.S. Banks Embrace Crypto Amid Evolving Landscape
Several leading American lenders, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, have announced initiatives over the last few months to offer digital asset services. Regulations are expected to be updated to accommodate these changes.
The current legislative focus, particularly the GENIUS Act and the CLARITY Act, could pave the way for the widespread adoption of stablecoins, enabling a significant expansion of participation in digital-asset offerings. In Fitch’s view, such developments offer banks a chance to boost fee income, increase yields, streamline operations, and modernize services—all of which appeal to institutions seeking growth in a challenging macroeconomic environment.
Fitch stated that stablecoin issuance, deposit tokenization, and the utilization of blockchain technology offer banks opportunities to improve customer service. They also enable banks to leverage blockchain’s speed and efficiency in areas such as payments and smart contracts.
Fitch warned that it could reassess the business models or risk profiles of U.S. banks with concentrated digital-asset exposures, which could harm their ratings. The agency noted that while regulatory advancements in the U.S. are paving the way for a safer cryptocurrency industry, banks still face an uphill battle when dealing with digital assets.
“However, banks would need to address challenges around the volatility of cryptocurrency values adequately, the pseudonymity of digital asset owners, and the protection of digital assets from loss or theft to adequately realize the earnings and franchise benefits.”
Fitch Ratings
Fitch Ratings' Influence and Bank Executive Discussions
Fitch Ratings is part of the United States’ “Big Three” credit rating bodies, along with Moody’s and S&P Global Ratings. Ratings by these firms have significant clout in the financial sector, shaping the perception of businesses and their appeal to investors.
That means that if Fitch were to downgrade a bank with significant crypto exposure, it could lead to reduced investor confidence, higher borrowing costs, and obstacles to growth.
The report highlighted that several major banks are also planning to test the crypto sector. On that note, Bank of America Corp. Chief Executive Officer Brian Moynihan, Citigroup Inc. CEO Jane Fraser, and Wells Fargo & Co. CEO Charlie Scharf are scheduled to meet with senators from both parties to discuss cryptocurrency market legislation that could soon come to a vote, according to a person familiar with the plans.
The discussions, hosted by the Financial Services Forum, a coalition of major banks, are expected to focus on bankers’ opposition to allowing interest payments on stablecoins, along with the ability of banks to compete in the crypto space and preventing the use of cryptocurrencies to facilitate illicit activities.
Stablecoin Surge and Potential Systemic Risks
Fitch further cautions that another risk may arise from the explosive growth of the stablecoin market, particularly if it becomes large enough to influence other areas and institutions. For example, the large-scale adoption of stablecoins might affect liquidity in the Treasury market or create new channels of financial instability.
Financial system risks could also increase if adoption of stablecoins expands, particularly if it reaches a level sufficient to influence the Treasury market.
Fitch
Moody’s, a major global financial services company, has also recently highlighted the potential systemic risks of stablecoins in a report from late September, arguing that the widespread adoption of stablecoins in the U.S. could ultimately threaten the legitimacy of the U.S. dollar. The company noted that the high penetration of USD-linked stablecoins, in particular, can weaken monetary transmission, especially where pricing and settlement increasingly occur outside the domestic currency.