Federal regulators warn banks to beware of ‘significant’ risks surrounding crypto assets

[ad_1]

By Anushree Dave

It’s important that risks in the crypto industry ‘do not migrate to the banking system’: regulators

A trio of federal regulators issued a warning to banks on Tuesday about the risks associated with crypto-assets.

In a joint statement, the Federal Reserve, Federal Deposit Insurance Corp. and the Comptroller of the Currency said “it is important that risks in the crypto-asset industry that cannot be mitigated or controlled do not migrate to the banking system.”

The document also highlighted a range of risks associated with crypto-assets and crypto-asset industry players, including: fraud and scams, inaccurate or misleading statements and disclosures by crypto-asset companies, and legal uncertainties related to custodial practices, redemptions and ownership rights. , among others.

The agencies said the past year had been marked by significant volatility and exposure to vulnerabilities in the crypto-asset sector, although they offered no new policies.

“Given the significant risks highlighted by the recent failures of several large crypto-asset companies, agencies continue to take a careful and cautious approach to current or proposed crypto-asset-related activities and exposures in each banking organization. “, the regulators said. Regulators said they have “significant security and soundness issues with business models that focus on crypto-asset-related business.”

Last year saw the collapse of crypto exchange FTX, which filed for bankruptcy in November. The cryptocurrency market has also lost a total of $2 trillion since its peak in November 2021. Popular non-fungible token art projects have also seen significant price floor drops after initial hype in late 2021 and early 2022. Victims of hacks and scandals lost over $3 billion. Last year.

Although crypto regulation has been a hot topic of discussion for the past couple of years, regulators have yet to decide what governance of the sector looks like.

-Anushree Dave

(END) Dow Jones Newswire

01-03-23 ​​1716ET

Copyright (c) 2023 Dow Jones & Company, Inc.

[ad_2]