• News
    • Bitcoin
    • Altcoins
  • NFT
  • Metaverse
  • Analysis
  • Regulation
  • Learn
  • Market Cap
What's Hot

Binance Addresses Accusations From Elizabeth Warren and Other US Senators in New Open Letter

2023-03-30

Best Bitcoin Mining Software — TOP Crypto Miners to Use in 2023

2023-03-30

Binance’s CZ refutes report claiming company has been hiding China ties

2023-03-30
Facebook Twitter Instagram
  • Contact
  • Terms & Conditions
  • Privacy Policy
  • DMCA
Facebook TikTok Instagram YouTube
CryptoNewsMetaverse
  • News
    • Bitcoin
    • Altcoins
  • NFT

    U.S. IRS Considers Taxing NFTs Like Other Collectibles

    2023-03-21

    Meta Shuts Down NFT Project to Focus on FinTech and Content

    2023-03-14

    Solana’s Solend V2 Release, Is SOL Price $50 Next?

    2023-03-06

    Amazon NFT Marketplace To Reportedly Launch Next Month

    2023-03-06

    Blur Coin Under Fire As Allegations Of Wash Trading Emerge

    2023-03-01
  • Metaverse

    Disney Metaverse Division Reportedly Scrapped

    2023-03-28

    Animoca Denies $200M Metaverse Fund Cut

    2023-03-27

    Metaverse Trading Hits All-Time High

    2023-03-24

    Exploring the Metaverse: A Guide to Investing in Metaverse Stocks

    2023-03-20

    A Guide to Virtual Land Staking in the Metaverse

    2023-03-20
  • Analysis

    DOJ Officially Seizes Over $456,000,000 Worth of Robinhood Shares Tied to FTX Founder Sam Bankman-Fried

    2023-01-08

    Mark Cuban Makes Prediction on Next Crypto ‘Scandal,’ Warns of Potential Implosion if Exposed: Report

    2023-01-08

    Binance Listings Cause Crypto Assets To Spike an Average of 41%: New Research

    2023-01-08

    Bitcoin Whales Unloaded BTC As Market Reversed and Parked Their Profits in This Crypto Asset Class: Santiment

    2023-01-07

    Crypto Analyst Predicts Breakout for AI-Focused Altcoin, Updates Outlook on Ethereum and Lido DAO

    2023-01-07
  • Regulation

    Binance Addresses Accusations From Elizabeth Warren and Other US Senators in New Open Letter

    2023-03-30

    Binance’s CZ refutes report claiming company has been hiding China ties

    2023-03-30

    $852,000,000 in Ethereum, Polygon, Fantom and Additional Altcoins Have Left Binance Following CFTC Lawsuit: Nansen

    2023-03-30

    Elizabeth Warren says she’s building an anti-crypto army in new campaign

    2023-03-30

    SEC Chair Gary Gensler To Face Congress Over Strategy on Digital Assets

    2023-03-30
  • Learn

    Best Bitcoin Mining Software — TOP Crypto Miners to Use in 2023

    2023-03-30

    Next Cryptocurrency to Explode 2023

    2023-03-30

    Chart Patterns Cheat Sheet For Technical Analysis

    2023-03-21

    Best NFT Wallets in 2023

    2023-03-21

    What are Dapps (Decentralized Applications) Crypto?

    2023-03-17
  • Market Cap
CryptoNewsMetaverse
Home»Regulation»US Federal Reserve, FDIC warn banks against crypto risks
US Federal Reserve, FDIC warn banks against crypto risks
Regulation

US Federal Reserve, FDIC warn banks against crypto risks

2023-01-03No Comments4 Mins Read
Share
Facebook Twitter LinkedIn Pinterest Email

The US Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) warned banks about the risks involved with crypto in a joint statement on Jan. 3.

The statement noted that the past year saw high volatility in crypto prices and exposed vulnerabilities in the sector. Therefore, the regulatory authorities highlighted some key risks banks should be wary of while dealing with crypto.

The authorities noted that the risk of fraud and scams among crypto firms could potentially affect banks dealing with such companies. In addition, the latest bankruptcy of FTX and fraud allegations against its founder Sam Bankman-Fried (SBF), could have potentially motivated the regulators to warn banks against such risks.

The statement said that banks should also beware of risks arising from legal uncertainty around crypto custody services, redemptions, and ownership rights.

The regulators warned that crypto firms might provide fraudulent disclosures and representations to banks. This could include misrepresentations about federal deposit insurance and other “unfair, deceptive, or abusive” practices that can harm consumers.

The regulators were referring to defunct crypto exchange Voyager Digital’s misleading statements about FDIC coverage. As a result, on July 28, 2022, FDIC warned Voyager Digital to cease misrepresenting facts about FDIC insurance coverage of user funds.

At the time of bankruptcy filing, Voyager had assured users would get back the USD that Voyager deposited with the FDIC-insured Metropolitan Commercial Bank. However, the bank later clarified that the user deposits are FDIC-insured, but the insurance does not protect customers in the case of Voyager’s bankruptcy.

In the joint statement, regulators cited the significant volatility of crypto markets, which can impact the deposit flows of crypto firms, as a risk for banks. Additionally, the statement warned that banks holding stablecoin reserves might face significant deposit outflows in case of bank runs on the stablecoin.

Furthermore, the federal regulators warned against contagion risk in the crypto sector. The contagion risk arises from the interconnectedness of crypto firms “through opaque lending, investing, funding, service, and operational arrangements,” the regulators said.

The domino effect observed after the Terra-LUNA fiasco, which caused a series of bankruptcies starting with hedge fund Three Arrows Capital, proved that crypto firms are intricately connected. This was again highlighted after FTX and Alameda Research’s collapse, after which Genesis and its parent company Digital Currency Group landed in hot water.

According to the regulatory bodies, this interconnectedness presents “concentration risks” for banks exposed to cryptocurrencies.

Furthermore, the statement noted that the crypto sector’s risk management and governance practices are in their infancy and lack “maturity and robustness.” Besides, decentralized networks lack governance mechanisms, an oversight system, and contracts and standards that establish roles, responsibilities, and liabilities.

Moreover, decentralized systems are vulnerable to hacks and cyber-attacks, outages, and present risk of illicit finance, the authorities warned, adding:

“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system.”

The federal agencies further stated that they are evaluating any proposals from banks to engage in crypto-related activities. They are also closely supervising banks with crypto exposure. The agencies added:

“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.”

However, the statement clarified that banks are neither “prohibited nor discouraged” to provide services to any specific type of companies, including crypto-related businesses.

Federal agencies continue to evaluate whether or how banks can conduct crypto-related activities. According to the statement, their main concern is that such activities should adequately address “safety and soundness, consumer protection, legal permissibility, and compliance with applicable laws and regulations.” This would include banks adhering to money laundering, illicit finance, and consumer protection laws while engaging in crypto-related activities.

The agencies further noted:

“… the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices.”

Source link

banks Crypto FDIC Federal Reserve risks warn
Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Posts

Binance Addresses Accusations From Elizabeth Warren and Other US Senators in New Open Letter

2023-03-30

Best Bitcoin Mining Software — TOP Crypto Miners to Use in 2023

2023-03-30

Binance’s CZ refutes report claiming company has been hiding China ties

2023-03-30

$852,000,000 in Ethereum, Polygon, Fantom and Additional Altcoins Have Left Binance Following CFTC Lawsuit: Nansen

2023-03-30
Add A Comment

Leave A Reply Cancel Reply

Top Posts

After Terra’s fall to Earth, get ready for the stablecoin era

2022-07-10

Hash Ribbon Reversal Signals Bitcoin Miner Capitulation Phase

2022-11-30

Celsius bankruptcy judge gives the nod for independent examiner probe

2022-09-15

Subscribe to Updates

Get the latest news and Update from Cryptonewsmetaverse.com about Crypto, Metaverse and NFT.

Our mission is to develop a community of people who try to make financially sound decisions. The website strives to educate individuals in making wise choices about Cryptocurrencies, NFT, Metaverse and more.

We're social. Connect with us:

Facebook Instagram YouTube TikTok
Top Insights

Binance Addresses Accusations From Elizabeth Warren and Other US Senators in New Open Letter

2023-03-30

Best Bitcoin Mining Software — TOP Crypto Miners to Use in 2023

2023-03-30

Binance’s CZ refutes report claiming company has been hiding China ties

2023-03-30
Get Informed

Subscribe to Updates

Get the latest news and Update from Cryptonewsmetaverse.com about Crypto, Metaverse and NFT.

  • Contact
  • Terms & Conditions
  • Privacy Policy
  • DMCA
© 2023 Cryptonewsmetaverse.com. Designed by ProdigitalX.

Type above and press Enter to search. Press Esc to cancel.

  • bitcoinBitcoin(BTC)$28,148.00-0.85%
  • ethereumEthereum(ETH)$1,796.29-0.47%
  • USDEXUSDEX(USDEX)$1.07-0.53%
  • tetherTether(USDT)$1.000.33%
  • binancecoinBNB(BNB)$317.350.42%
  • usd-coinUSD Coin(USDC)$1.000.14%
  • rippleXRP(XRP)$0.54-1.76%
  • cardanoCardano(ADA)$0.378109-1.80%
  • Lido Staked EtherLido Staked Ether(STETH)$1,794.09-0.53%
  • dogecoinDogecoin(DOGE)$0.074986-1.24%