Banks have received a joint statement from U.S. financial authorities outlining the dangers associated with crypto-assets. Will it stop people from adopting institutionally?
To emphasize the "important dangers" connected with crypto-assets, three U.S. regulators—the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC)—released a joint statement. In view of recent developments, including the failure of FTX, Luna, Three Arrow Capitals, and several other crypto-lending protocols, this is to be expected.
According to the statement, regulatory agencies won't forbid or discourage financial firms from working with the cryptocurrency industry. However, they will closely watch banks with exposure to cryptocurrencies.
The American regulatory agencies want to make sure that hazards associated with cryptoassets do not spread to the banking sector. They are not only keeping an eye on the banks that have cryptocurrency exposure for this reason, but they will also closely examine any future bids from banks to engage in cryptocurrency-related services.
Numerous eminent American banks have engaged in the practice of offering services linked to cryptocurrencies. The American investment giant Goldman Sachs introduced a cash loan product secured by Bitcoin in April 2022. The largest custody bank in the world, Bank of New York Mellon, declared in October that it will provide bitcoin asset custody.
The regulators want bank operations linked to crypto assets to be consistent with safe and sound banking procedures. Banks shall adhere to all applicable consumer protection, legal permissibility, and other rules and regulations while offering cryptocurrency services.
“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.”
The community anticipates widespread bank de-risking of blockchain-related businesses. Others, on the other hand, think institutions will figure out safe and correct procedures.
