US federal bank regulators have issued a joint statement calling attention to risks to banking organizations related to crypto assets and the crypto asset sector. The statement also covers the agency’s approach to oversight of the cryptocurrency industry.
The Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) have jointly released a statement on cryptocurrency risk.
The statement itself focuses on the risks associated with crypto assets and the crypto sector. We discuss how cryptocurrency volatility over the past year has been well documented and illustrates the significant risk that involvement poses. It also highlights industry vulnerabilities and ensures U.S. banking organizations are aware.
This statement was made shortly after the collapse of the crypto trading platform FTXAt a time when caution is paramount in the industry, the statement has come to ensure the safety of US banking organizations.
Due to existing risks, federal bank regulators recommend a cautious approach to crypto assets. Regulators also continue to closely monitor crypto-related activities and exposures in banking organisations. Institutions are looking to assess ways to conduct crypto-related activities more securely and in compliance with existing laws and regulations. This statement focuses on the purpose of protecting consumers by promoting a prudent approach to cryptocurrency as a whole.
The agency also explained plans to issue additional statements related to its involvement in crypto-related activities.
Regulatory warning against cryptocurrency activity
in the statementregulators have warned of a high risk of fraud and fraud among participants in the crypto sector. Other important warnings in the statement include:
- Significant volatility in the cryptocurrency market
- Sector risk management and governance practices showing lack of maturity and robustness
- Significant risks associated with open, public or decentralized networks or similar systems – this includes lack of governance mechanisms to establish oversight of the system.Lack of contracts or standards to clearly establish roles, responsibilities and obligations
- Vulnerability to cyberattacks, outages, etc. was also mentioned as a risk to consider
The statement also drew attention to the “contagion risk” of crypto assets. The chain reaction of negative crypto news was accentuated by the negative impact of his FTX news on the value of crypto assets.
The regulator also explained that there are “grave safety and integrity concerns.”
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