Fitch warns: Banks holding too much Bitcoin may face credit rating downgrades

Fitch Issues Warning: US Banks Accelerating Blockchain Adoption May Face Credit Downgrades, Financing Costs Under Pressure to Rise

(Previous Context: Tether CEO Paolo Ardoino: S&P Smearing Us Is Our Greatest Badge of Honor! Responds to USDT Being Labeled as “Junk Rated”)
(Background Supplement: Tether’s Bitcoin Purchases Drag Down USDT—S&P Gives Worst Rating: Rising Risk Asset Ratio Increases Decoupling Risk)

On December 7 (US Eastern Time), Fitch Ratings released a major report pointing out that US banks have been aggressively investing in blockchain and digital assets since the Trump administration loosened regulations. If banks lack sufficient firewalls, their credit ratings may be downgraded, driving up financing costs. For Wall Street, this is a warning colder than a Manhattan winter night.

Credit Rating Pressure Behind the Fee Incentive

For major banks like JPMorgan, Bank of America, and Wells Fargo, blockchain means faster payment routing, automated settlement via smart contracts, and new fee income. However, Fitch’s models reveal another calculation: if crypto exposure becomes concentrated, the additional revenue is far from enough to offset volatility, compliance, and operational risks. The report states:

“Stable fee income cannot offset volatility, compliance, and operational risks.”

If credit ratings are downgraded, banks will see higher rates when issuing interbank loans, senior debt, and in capital markets fundraising, directly squeezing net interest margins. In other words, picking up the digital asset coin could upend the vault full of capital.

Chain Reaction of Stablecoins Withdrawing Deposits

Fitch and Moody’s are focusing on the rapid expansion of stablecoins. When customers transfer US dollar deposits into stablecoins, banks’ liquidity bases are eroded, causing “deposit disintermediation.” Stablecoin issuers typically hold US Treasuries as reserves; if panic triggers massive redemptions, issuers will have to sell Treasuries, and the selling pressure would reverberate through the bond market, impacting the entire financial system. The emergence of a “shadow dollarization”—where US dollar pricing and settlement mechanisms are marginalized—also lays a long-term minefield for the Fed’s monetary dominance.

Regulatory Green Light, Ratings Red Light Still On

Policy signals are divided. In November, the OCC (Office of the Comptroller of the Currency) issued an interpretive letter allowing banks to hold small amounts of digital assets for “operational purposes,” seemingly giving the green light for blockchain payment networks. However, Fitch emphasizes that as soon as exposure becomes “concentrated” or “significant,” their credit rating models will deduct points. This puts banks in a dilemma: large, well-capitalized banks may be able to balance risk and reward, but smaller, more aggressive banks may be unable to bear the cost of a rating downgrade.

As the 2025 GENIUS Act advances, Wall Street must maintain a balance between embracing new revenue streams and protecting credit ratings. Fitch’s report draws a clear line: innovation is allowed, but only if it’s built on rigorous risk isolation. For banks, the question is no longer “can we do it,” but “how much can we do without paying higher financing costs.” On this increasingly narrow balance beam, every step challenges Wall Street to reassess risk, reward, and reputation.

Related Reports

S&P’s First DeFi Rating! Sky Protocol, by former MakerDAO members, Receives B- Credit Rating—Centralized Governance Is the Biggest Concern
a16z Report: Liquidity, Sovereignty, and Credit Challenges Behind the Rise of Stablecoins
Collapse of US Credit Standard? US Dollar Index Plunged 9% in Trump’s First 100 Days, the Worst in Five Decades
〈Fitch Warning: Will Downgrade Banks Holding Too Much Bitcoin〉
This article was first published on BlockTempo, the most influential blockchain news media.