Fed, FDIC, and Currency Comptroller Warn Banks to Gamble With Crypto

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Three federal financial agencies issued a joint statement on Tuesday warning banks of key risks to banks associated with cryptoassets and the cryptoasset industry. The statement explains that while banks are not prohibited or discouraged from providing services to crypto businesses, the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency believe that issuing or holding cryptocurrency is very likely to be inconsistent. with safe and sound banking practices.

Regulators say they are still figuring out how to deal with banks and crypto, working on a case-by-case basis, and are being careful and cautious.

The agencies also stress that risks in the crypto-asset industry that cannot be mitigated or contained do not migrate to the banking system.

The statement is much stronger than the agencies’ previous ones. In November 2021, they announced a policy sprint initiative to clarify crypto regulations. But while that statement talked about doing things in a safe and responsible way, a major goal was to make sure banks weren’t dealing crypto for criminals.

Tuesday’s statement, meanwhile, focuses primarily on potential crypto risk. Some of the risks that banking organizations should be aware of are:

Each has sent ripples through the crypto ecosystem, leaving other businesses damaged or destroyed in their wake. In the background, regulators have tried to keep pace, and NFT and Bitcoin theft have spawned arguments about what owning crypto really means.

Tuesday’s statement said banking organizations are neither prohibited nor discouraged from providing banking services to customers of a specific class or type, as permitted by law or regulation, but the regulators’ message to banks is clear: think long and hard before jumping into crypto or deepening your investment in the space.

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