The report wrote in detail about risks posed by the crypto sector to the banking industry and the necessary precautions for it.
At the beginning of the new year, regulatory agencies of the United States released a joint statement on the risk posed by crypto assets to banking organizations. The specific agencies releasing the statement were the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve System (Federal Reserve), and the Office of the Comptroller of the Currency (OCC). The statement further highlighted the volatility faced by the crypto-asset sector in the previous year and the dangers that the banking industry should be aware of.
The statement mentioned eight risks in detail, including scams, volatility, risk management, and governance issues. It also noted that uncontrolled risks could not spill over to the banking system. The agencies continued to build expertise and knowledge of the crypto industry to understand the space better. Because of the recent failures of major crypto organizations, the agencies adopted a careful approach.
“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. Further, the agencies have significant safety and soundness concerns with business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector,” the statement noted. The agencies would continue to check the development of the crypto sector regularly and mentioned that banking organizations should appropriate policies, procedures, controls, and other regulatory measures.