U.S. Regulators Issue Joint Statement on Crypto Risks

U.S. regulators once more warned banks Thursday of the dangers their crypto shoppers pose to the U.S. banking system, the newest in a joint effort by federal companies to rein within the cryptocurrency trade because it recovers from the collapse of FTX.

Key Takeaways

  • Federal Reserve, Federal Deposit Insurance coverage Company, and the Workplace of the Comptroller of the Foreign money once more warn banks about dangers tied to cryptocurrency. 
  • The joint assertion follows an identical warning solely seven weeks in the past.
  • Regulators have up to date their feedback in mild of current stablecoin scrutiny.

The Board of Governors of the Federal Reserve, the Federal Deposit Insurance coverage Company (FDIC), and the Workplace of the Comptroller of the Foreign money (OCC) issued a joint assertion Thursday warning U.S. banks of the liquidity dangers related to crypto-assets, saying “sure sources of funding from crypto-asset-related entities could pose heightened liquidity dangers to banking organizations as a result of unpredictability of the dimensions and timing of deposit inflows and outflows.”

The assertion builds on an identical warning issued seven weeks in the past because the mud settled after the FTX meltdown.

Whereas banks aren’t prohibited or discouraged from working with “prospects of any particular class or sort, as permitted by legislation,” lenders ought to “actively monitor the liquidity dangers inherent in such funding sources and set up and keep efficient threat administration, the regulators stated.”

On “deposits positioned by a crypto-asset-related entity,” banks have been warned, “the steadiness of such deposits could also be pushed by the habits of the top buyer or crypto-asset sector dynamics, and never solely by the crypto-asset-related entity itself.” It was one other reminder of the dangers posed by entities reminiscent of FTX, whose collapse was sparked by heavy promoting of its native token.

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The regulators additionally warned of dangers posed by stablecoin reserves, saying their stability is contingent on “demand for stablecoins, the arrogance of stablecoin holders within the stablecoin association, and the stablecoin issuer’s reserve administration practices.” That assertion follows current efforts by the New York District Monetary Service and the Securities and Alternate Fee to crack down on stablecoin issuers and staking companies.