Banks dealing with digital assets must be mindful of potential fraud, legal uncertainties, volatility and inaccurate or misleading disclosures, federal regulators said in a joint statement.
The Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency said the statement reflected “the significant volatility and vulnerabilities” witnessed in the cryptocurrency space over the past year.
The statement also warned about potential contagion risk in the crypto-asset sector, “resulting from interconnections among certain crypto-asset participants, including through opaque lending, investing, funding, service and operational arrangements.”
The statement said the regulators have safety and soundness concerns with banks that have business models with concentrated exposure to the crypto industry.
The agencies also noted that banks that issue or hold crypto tokens stored on a public, decentralized network are “highly likely to be inconsistent with safe and sound banking practices.”
The regulators said they are “carefully reviewing” and proposals from banks that want to engage in activities that involve crypto assets. The agencies also said they will continue to closely monitor crypto-related exposures and, as warranted, issue additional statements tied to banks’ engagement in crypto-asset-related activities.