The US regulators warned of the risks associated with cryptocurrencies, such as fraud and scams, legal uncertainties, inaccurate or misleading representations and disclosures and the participants and banking organizations.
The joint statement, the first of its kind, 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 on Tuesday. It also called it Contagion risk within the sector, which could result from interconnections among certain crypto-asset participants as one of the concerns.
The joint statement by the US regulators said that it is important that the risks related to the sector that can't be mitigated or controlled do not migrate to the banking system.
The collapse of the FTX trading platform in 2022 has caused concern among regulators. The market is looking for quick profits and the market is attracted to risks and volatility.
FTX was a high-profile exchange that collapsed in November due to misappropriation of customer funds.
The agencies are closely watching banking organizations that are exposed to the risks associated with the sector, and are carefully reviewing any proposals from banking institutions to engage in activities that involve cryptocurrencies-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 because of the significant risks highlighted by the recent failures of several large crypto-asset companies.
Banking organizations aren't allowed nor discouraged from providing banking services to customers of a 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, to effectively identify and manage risks, it noted.