Customers, banks should be wary of risks from crypto assets, warn US regulators

The severe collapse of the FTX trading platform in 2022 has raised concerns from regulators. (File)

Washington:

Risks such as fraud and scams, legal uncertainty, inaccurate or misleading presentation and disclosure, and volatility are associated with crypto assets and participants as well as banking institutions should know about them, US regulators warned in a joint statement.

The Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) issued a joint statement on Tuesday. (local time).

The joint statement, the first of its kind, also referred to as the contagion risk in the crypto-asset sector, which can result from connections between certain crypto-asset participants are one of the concerns.

“It is important that the risks associated with the crypto-asset sector that cannot be mitigated or controlled do not transfer to the banking system,” the US regulators said in a joint statement.

The severe collapse of the FTX trading platform in 2022 has raised concerns from regulators. Cryptocurrencies involve risk and volatility but the market has attracted traders and investors looking to make quick profits.

FTX is a popular cryptocurrency exchange and collapsed in November due to reports of embezzlement of customer funds.

“The authorities are monitoring banking institutions that may be exposed to risks stemming from the crypto-asset sector and carefully consider any proposals from banking institutions to engage in such activities. related to crypto-assets,” the statement said.

With significant risks highlighted by the recent failures of several major crypto asset companies, the statement said the authorities continue to take a careful and prudent approach regarding current or proposed crypto asset-related activities and risks at each banking institution.

However, it said banking institutions were neither prohibited nor encouraged to provide banking services to customers of any particular type or category, as permitted by law or regulation.

“Banking institutions should ensure proper risk management, including board oversight, policies, procedures, risk assessment, controls, gates and railings, and oversight, to identify effectively identify and manage risk,” it noted.

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