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US federal agencies release joint statement on crypto asset risks and safe practices

The Fed, FDIC, and OCC joined forces to wish the banks they supervise a FUD-filled new year by warning about the risks associated with crypto assets and their efforts to mitigate those risks.

The federal bank regulatory agencies of the United States began the new year with a statement on crypto assets that looked back at the crypto sector’s problems in 2022. On Jan. 3, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a joint statement about past issues and their efforts to maintain sound banking practises in the face of those difficulties.

“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. They identified eight specific risks, including fraud, volatility, contagion, and other well-known concerns.

The agencies also stated that “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 a stark warning to the sector:

“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.”

With references to agencies’ “case-by-case approaches to date,” the statement hinted at the state of crypto regulation in the United States and the possibility of change:

“Through the agencies’ case-by-case approaches to date, the agencies continue to build knowledge, expertise, and understanding of the risks crypto-assets may pose to banking organizations, their customers, and the broader U.S. financial system.”

All of the banking regulatory agencies have previously expressed reservations about cryptocurrency. Their attitudes, however, are not uniform. For example, an FDIC representative has expressed support for stablecoins. The OCC has recently taken steps to become more active in fintech, and the Fed has expressed an active, if noncommittal, interest in central bank digital currency.

 

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