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On Tuesday, the Federal Reserve, FDIC and OCC released joint statement on risks related to cryptographic assets. The statement addressed, amongst other things, risks to banks reminiscent of fraud, inaccurate or misleading statements from crypto firms, and market volatility.
According to the agency, “crypto-sector risks that can not be mitigated or controlled don’t migrate to the banking system.” The statement said they’re cautious about cryptocurrencies attributable to the numerous risks and failures of several major cryptocurrency firms (see FTX). The Fed, FDIC and OCC also said they’re evaluating the proposed activities and exposures to crypto assets in each banking organization to make sure maximum consumer protection in addition to compliance of cryptocurrencies with applicable regulations.
The statement addressed current concerns about cryptocurrencies, including legal issues regarding redemptions and proper custody procedures for crypto assets. The statement was released shortly before disgraced co-founder of cryptocurrency exchange FTX, Sam Bankman-Fried, who faces greater than 100 years in prison if convicted, pleaded not guilty to charges including conspiracy, electronic fraud and securities fraud.
While the agencies stated that “banking organizations are usually not prohibited or discouraged from providing banking services to customers of any particular class or type by law or regulation,” in addition they stated that they “will proceed to closely monitor cryptocurrencies.” – exposures related to the assets of banking organizations.”
One thing was clear, despite the paradox: The Fed, FDIC and OCC see decentralized systems as a dangerous minefield for uninformed investors:
heightened risks related to open, public and/or decentralized networks or similar systems, including, but not limited to, the shortage of governance mechanisms to determine system oversight; lack of contracts or standards that clearly define roles, responsibilities and obligations; and vulnerabilities related to cyber attacks, downtime, lost or trapped assets and illicit financing.
