US Regulators Issue their First-Ever Joint Warnings on Crypto Risks

US Regulators Issue their First-Ever Joint Warnings on Crypto Risks

The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) have jointly issued their first-ever joint warnings about crypto risks to banking organizations. "The agencies have significant safety and soundness concerns with business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector," the regulators said.

US Regulators Warn About Crypto Risks

The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued the first-ever joint statement on crypto risks to banking organizations on Tuesday.

They explained that events in the past year showed "significant volatility and the exposure of vulnerabilities in the crypto-asset sector." The regulators named many risks, including fraud and scams, legal uncertainties, inaccurate or misleading representations by crypto companies, significant volatility in crypto markets, run risks, and contagion risks. "It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system," the joint statement said.

"Based on the agencies’ current understanding and experience to date, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network or similar system is highly likely to be inconsistent with safe and sound banking practices," the statement explained. Further adding:

"The agencies have significant safety and soundness concerns with business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector." 

Close Monitoring of Crypto-Asset-Related Exposures

The Federal Reserve, the FDIC, and the OCC noted that they "will continue to closely monitor crypto-asset-related exposures of banking organizations," concluding:

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

What is your take on the joint crypto warnings by the Federal Reserve, the FDIC, and the OCC? Please post your comments.