US regulators warn of risks from cryptocurrency

US regulators warn of risks from 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.

The joint statement on Tuesday was issued by the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation FDIC and the Office of the Comptroller of the Currency OCC, which also called it contagion risk, which may result from interconnections among certain certain crypto-asset participants as one of the concerns.

The joint statement by 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 who are looking to make quick profits due to the risks and volatility of the currency.

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

The agencies are closely monitoring banking organizations that may be exposed to risks stemming from the sector of cryptocurrencies and carefully reviewing any proposals from banking organizations to engage in activities that involve cryptocurrencies-assets, the statement said.

The statement said agencies continue to take a careful and cautious approach to current or proposed crypto-asset related activities and exposures at each banking organization because of 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.

It noted that banking organizations should make sure they have appropriate risk management, including board oversight, policies, procedures, risk assessments, controls, gates and guardrails, and monitoring, in order to identify and manage risks.