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U.S. regulators and the Federal Reserve have issued a joint warning about key liquidity risks associated with crypto assets. However, <\/strong>the regulators clarified that banks \u201care neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation.\u201d<\/strong><\/p>\n The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) jointly issued a statement regarding crypto on Thursday.<\/p>\n The Federal Reserve, the FDIC, and the OCC explained that their statement \u201chighlights key liquidity risks associated with crypto assets and crypto-asset sector participants that banking organizations should be aware of.\u201d They warned:<\/p>\n In particular, certain sources of funding from crypto asset-related entities may pose heightened liquidity risks to banking organizations due to the unpredictability of the scale and timing of deposit inflows and outflows.<\/p>\n<\/blockquote>\n For example, the stability of deposits by crypto entities for the benefit of their customers may be driven by \u201cthe behavior of the end customer or crypto-asset sector dynamics, and not solely by the crypto-asset-related entity itself, which is the banking organization\u2019s direct counterparty,\u201d the regulators cautioned. \u201cSuch deposits can be susceptible to large and rapid inflows as well as outflows, when end customers react to crypto-asset-sector-related market events, media reports, and uncertainty.\u201d<\/p>\n Another example is deposits that \u201cconstitute stablecoin-related reserves,\u201d which may be \u201csusceptible to large and rapid outflows,\u201d including from \u201cunanticipated stablecoin redemptions or dislocations in crypto-asset markets,\u201d the regulators detailed.<\/p>\n Banking organizations using funding sources from crypto entities need to actively monitor liquidity risks and establish effective risk management and controls, the Federal Reserve, the FDIC, and the OCC advised. While emphasizing that banking organizations should apply existing risk management principles to crypto, the regulators clarified:<\/p>\n Banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation.<\/p>\n<\/blockquote>\n The Fed, the FDIC, and the OCC also issued a joint warning<\/a> about crypto risks in January. The regulators mentioned fraud, scams, legal uncertainties, inaccurate or misleading representations by crypto companies, significant volatility in crypto markets, run risks, and contagion risks.<\/p>\nUS Regulators Issue Joint Statement on Crypto<\/h2>\n
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