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The Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency (OCC) issued a joint statement on Tuesday, warning of the “substantial” risks that crypto assets could pose to the broader banking system.
“It is important that risks associated with the crypto sector that cannot be mitigated or controlled do not migrate into the banking system,” the institutions said in a joint statement.
“Given the significant risks highlighted by the recent failures of several large crypto-asset firms, the authorities should exercise caution and caution in relation to current or proposed crypto-related activities and exposures at each banking organisation. We continue to take a cautious approach.”
Regulators have warned banks of a long list of crypto risks, including fraud, volatility, poor risk management and contagion within the crypto sector.
The agency also flagged legal uncertainties regarding cryptocurrency redemption, ownership, and custody practices.
Tuesday’s statement comes just minutes before Sam Bankman-Fried, co-founder and former CEO of failed cryptocurrency exchange FTX, pleaded not guilty to eight counts of wire fraud, securities fraud and conspiracy. I was.
Bankman-Fried faces up to 115 years in prison for alleged involvement in the most high-profile cryptocurrency debacle ever.
“Inconsistent with safe and sound banking practices”
While regulators are still researching whether or how banks can incorporate cryptocurrencies into their operations in a secure way that protects consumers, three of the regulators’ opinions are that open public networks Or issuing or holding virtual currency issued, stored, or transferred on a decentralized network is “inconsistent.” with safe and sound banking practices.
“Based on the agency’s current understanding and past experience, the agency will issue major cryptoassets that are issued, stored, or transferred in open, public, and/or decentralized networks or similar systems. We believe that it is very important to retain or retain, as it is likely to be inconsistent with safe and sound banking practices,” the statement said.
“Furthermore, the authorities have serious safety and sound concerns about business models that concentrate on crypto-related activities or have concentrated exposure to the crypto-sector.”
Authorities are supervising banks that may be exposed to risks from the crypto sector and are considering proposals from banks to engage in crypto activities.
The OCC introduced a rule that banks must seek permission to be able to engage in cryptocurrency activities. warned about the contagion risk of cryptocurrencies, saying the industry’s growth has been driven by hype.
The Financial Stability Oversight Council closely monitors the cryptocurrency market, but does not yet view cryptocurrency activity as systematic.
Several bills to regulate cryptocurrencies have been proposed in Congress, but it will take time for the bills to become law.
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