Events of the past year have highlighted several key risks posed by cryptoassets that banks should consider if they wish to offer crypto-related services, the Federal Reserve, FDIC and the Office of the Comptroller of the Currency said today in a joint statement. The agencies did not single out any specific event—like the FTX collapse—but instead listed several signs of the “significant volatility and the exposure of vulnerabilities in the cryptoasset sector” that such events have allegedly exposed. Among the risks cited are the possibility of fraud and scams, legal uncertainties related to custody practices and ownership rights, and the lack of maturity in risk management practices within the crypto sector.
The three agencies said they are continuing to assess how banks could provide crypto services in a safe manner. However, they added that based on their current understanding, “the agencies believe that issuing or holding as principal cryptoassets 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 cryptoasset-related activities or have concentrated exposures to the cryptoasset sector.”
