OCC, FDIC, & Fed Warn Banks of Significant Risks in the Crypto Industry
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Three US banking regulators, the Federal Reserve (Fed), Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC), have warned banks over holding public crypto-assets.
The warning comes less than two months following the collapse of the FTX exchange, which lost more than $ 8 billion of customers’ money.
“The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector,” Fed, FDIC, and OCC said in a joint statement. “These events highlight a number of key risks associated with crypto-assets and crypto-asset sector participants that banking organizations should be aware of [.]”
According to regulators, banks working with crypto are at risk of scams and legal uncertainties related to redemptions, custody practices, and ownership rights. They also cited vulnerabilities of the stablecoin for running the risk, which just happened with the collapse of Luna stablecoins.
“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” said the regulators. “Given the significant risks highlighted by recent failures of several large crypto-asset companies, the agencies continue to take a careful and cautious approach related to current or proposed crypto-asset-related activities and exposures at each banking organization.”
The agencies didn’t lay out any new rules in the warning. However, they said that they are assessing how banks can conduct crypto asset activities while staying compliant with AML and consumer protection regulations.
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