Crypto

Banks should be more cautious on crypto contagion risks, U.S. regulators warn

Jan 3 (Reuters) – Banks should be aware of key risks associated with cryptocurrency, including legal uncertainties and inaccurate or misleading disclosures by digital asset firms, U.S. bank regulators said on Tuesday, less than two months after the collapse of crypto exchange FTX stunned financial circles.

In their first joint statement on crypto, the Federal Reserve, Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency also said that they have safety and soundness concerns with bank business models that have concentrated exposure to the crypto sector, or those that are highly concentrated in crypto-related activities.

The agencies added that banks’ issuing or holding crypto tokens that are stored on a public, decentralized network are “highly likely” to be inconsistent with safe and sound banking practices, potentially dealing a blow to several banks’ efforts to provide crypto services to their customers.

The statement comes after months of hesitancy from the banking regulators to issue uniform guidance or rules on cryptocurrency, even as banks have expressed a desire for increased regulatory clarity.

The OCC has previously said banks must obtain regulatory approval before engaging in certain crypto-related activities, such as holding tokens on behalf of clients, while the Fed has instructed banks to notify their supervisors before moving forward with any efforts involving crypto.

Reporting by Hannah Lang in Washington;
Editing by Chris Reese and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.

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