Federal Agencies Advise on Safe Crypto Practices
The Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) released a joint statement on January 3rd, reflecting on the challenges faced by the crypto sector in 2022 and their efforts to ensure safe banking practices.
Authorities said it's important to keep cryptocurrency risks from spreading into the financial system. They listed eight specific concerns, including fraud, volatility, contagion, and other well-known problems, that should be regulated.
“It is critical that risks associated with the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” said the agencies.
Moreover, “banking organisations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation,” but issued the following warning:
The experts caution, however, that crypto assets processed, stored, or transferred on open, public, decentralized networks or similar systems are likely to be inconsistent with safe banking practices.
U.S. politicians have expressed outrage over the collapse of FTX, with Sens. Elizabeth Warren and Tina Smith demand answers from Federal Reserve Chairman Jerome Powel. Alameda Research, the sister company of FTX, invested $11.5 million in Moonstone, a bank based in Washington. As a result of this, other U.S. banks have also experienced "heightened volatility."
FTX, a cryptocurrency trading platform, suffered a highly publicized bankruptcy due to alleged mismanagement, leading to the loss of billions of dollars in customer funds.
Will we see increased regulation in the crypto industry as a result of these events Only time will tell.
CBW - External Analyst