The Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) warned banks to be aware of the significant volatility and vulnerabilities of cryptocurrencies.
They said that banks with exposure to crypto could especially be at risk. The regulators highlighted that the so-called challenger banks or the next-generation financial institutions have started offering digital asset services around the world.
The statement said agencies believe that issuing or holding as principal crypto assets that are issued, stored or transferred on an open, public or decentralized network or similar system is likely to be unstable with safe and sound banking practices. This comes as US politicians urge regulators for more transparency from the digital asset industry following the November collapse of FTX. They expressed concerns about Alameda Research, FTX’s sister company, that invested $11.5 million in Washington-based bank Moonstone and other US banks were experiencing heightened volatility because of crypto investments.
It should be noted that crypto regulation in the United States is also a hot topic. The renewed push for regulation and transparency comes as billions of dollars were wiped out because of the alleged mismanagement of FTX. The crypto exchange collapsed because it used client money to make risky investment bets through Alameda Research.