The top US bank regulators teamed up to issue a new regulatory warning to lenders about the risks of investing in cryptocurrency. On Jan. 3, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a joint statement about past issues and their efforts to maintain sound banking practices in the face of those difficulties.
Risks associated with crypto-assets include fraud and scams, legal uncertainties, inaccurate or misleading representations and disclosures, and volatility, which participants and banking organizations should be aware of, according to US regulators.
It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,the joint statement said.
Due to the significant risks highlighted by the recent failures of several large crypto-asset companies, including FTX, the statement said that agencies continue to take a cautious approach to current or proposed crypto-asset-related activities and exposures at each banking organization.
The agencies are supervising banking organizations that may be exposed to risks stemming from the crypto-asset sector and carefully reviewing any proposals from banking organizations to engage in activities that involve crypto-assets,the statement said.
Banking organizations are neither prohibited nor discouraged by the regulators from providing banking services to customers of any specific class or type, as permitted by law or regulation. Banking organizations are urged to implement appropriate risk management practices to effectively identify and manage risks, such as board oversight, policies, procedures, risk assessments, controls, gates and guardrails, and monitoring.
The statement referred to the current state of crypto regulation in the United States and the possibility of change, citing agencies’ “case-by-case approaches to date.”
However, regulators cautioned that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system, is highly likely to be incompatible with safe and sound banking practices.
