US regulators warn of risks to cryptocurrency

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US regulators warn of risks to cryptocurrency

The US regulators warned that there are risks associated with cryptocurrencies, such as fraud and scams, legal uncertainties, inaccurate or misleading representations and disclosures, and volatility, and the participants and banking organizations should be aware of them.

The Joint Statement was issued on Tuesday by the Board of Governors of the Federal Reserve the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency OCC and the Office of the Comptroller of the Currency OCC. The joint statement was called on Tuesday by the Board of Governors of the Federal Reserve, as well as the possibility of interconnections among certain crypto-asset participants as one of the concerns.

The joint statement from the US regulators said that it is important that risks related to the sector that can't be mitigated or controlled do not migrate to the banking system.

The collapse of the trading platform FTX in 2022 has caused concern among regulators. The market is looking for traders and investors looking to make quick profits because of the risks and volatility.

FTX collapsed in November due to misappropriation of customer funds, a high-profile exchange.

The agencies are reviewing any proposals from banking organizations that are exposed to the risks associated with the sector of cryptocurrencies and are carefully reviewing any proposals from banks to engage in activities that involve crypto-assets, the statement said.

The statement said agencies continued to take a careful and cautious approach when it comes to current or proposed activities related to cryptocurrencies-asset related activities and exposures at each banking organization, given the significant risks highlighted by the recent failures of several large crypto-asset companies.

It said banking organizations are not prohibited from providing banking services to customers of any specific class or type, as permitted by law or regulation.

Banking organizations should ensure appropriate risk management, including board oversight, policies, procedures, risk assessments, controls, gates and guardrails, and monitoring, in order to identify and manage risks, it noted.