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US Regulators Warn Banks Of Crypto Risks

The warning comes shortly after the recent FTX collapse

As the utilisation of cryptocurrencies becomes broader across the US, The Federal Reserve, Federal Deposit Insurance Corp (FDIC), and the Office of the Comptroller of the Currency have stated that they are amping up their oversight of banks that have business interests in crypto assets.

The regulators are looking to carefully scrutinise any proposal from banks to engage with the crypto sector despite concerns about contagion risks.

Adding that banks issuing or holding crypto tokens stored on public, decentralised networks are “highly likely” to be inconsistent with safe and sound banking practices.

The agencies said in a statement, “Given the significant risks highlighted by recent failures of several large crypto-asset companies, the agencies continue to take a careful and cautious approach related to current or proposed crypto-asset-related activities and exposures at each banking organization.”

In December last year, the New York Department of Financial Services (DFS) stated that banks need to inform it of any virtual currency plans at least three months before commencing the activity.

The statement also reads, “The agencies continue to assess whether or how current and proposed crypto-asset-related activities by banking organizations can be conducted in a manner that is safe and sound, legally permissible, and in compliance with applicable laws and regulations, including those designed to protect consumers.”

The DFS’ 90-day rule also applies to any portion of crypto activities that are to take place by a third party. Lawmakers have also highlighted risks from fraud, scams, high volatility, legal uncertainties, and inaccurate or misleading representations and disclosures by crypto asset companies across the US.

The primary takeaway from the statement is that banks should be more cautious when considering crypto investments.

Written By

Isa Muhammad is a writer and video game journalist covering many aspects of entertainment media including the film industry. He's steadily writing his way to the sharp end of journalism and enjoys staying informed. If he's not reading, playing video games or catching up on his favourite TV series, then he's probably writing about them.

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