The U.S. Office of the Comptroller of the Currency (OCC) is issuing a joint statement with the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) urging US banks to be more cautious of risks related to crypto.
The statement comes two months following the collapse of the crypto exchange FTX, which left many investors unable to withdraw their funds.
The digital asset Terra (LUNA) and crypto companies Three Arrows Capital (3AC) and Celsius Network also saw their demise in 2022.
“The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector. These events highlight a number of key risks associated with crypto-assets and crypto-asset sector participants that banking organizations should be aware of.”
As the collapse of large crypto companies underscores the significant risks in the industry, the agencies say that they will continue to carefully and cautiously approach current and proposed crypto-related activities and exposures of banks.
“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 Fed, OCC and the FDIC also say they have significant safety and soundness concerns with crypto-focused business models and those with concentrated exposure to the new asset class.
“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.”
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