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US Regulators to Keep a Close Eye on Banks With Crypto Exposure

2 mins
Updated by Kyle Baird
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In Brief

  • Three U.S. finance regulators issued a statement to banks with crypto exposure.
  • They want to align crypto offerings from banks with safe and sound banking practices.
  • The statement says they'll neither prohibit nor discourage banks from engaging with the crypto sector.
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U.S. financial regulators have issued a joint statement to banks on the risks possessed by the crypto-assets. Will it drive away institutional adoption?

Three U.S. regulators, including the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), issued a joint statement to highlight ‘key risks’ associated with crypto-assets. This comes in light of events of the past year, such as the collapse of FTX, Luna, Three Arrow Capitals, and various other crypto-lending protocols.

The statement further reads that regulatory bodies will neither prohibit nor discourage banking organizations from engaging with the crypto sector. But, they will closely monitor banks with crypto exposures.

Crypto Regulations Starting With Banks

The U.S. regulatory bodies want to ensure that crypto-asset risks do not migrate to the banking system. For that, they are not only monitoring the banks that have crypto exposure but will carefully review future proposals from banks to participate in crypto-related services.

Many notable American banks have indulged in providing services related to cryptocurrencies. In April 2022, American investment banking company, Goldman Sachs, created a Bitcoin-backed cash loan product. Bank of New York Mellon, the world’s biggest custody bank, announced in October that they would provide custody service for cryptocurrency assets.

Goldman Sachs Digital Asset

Inconsistencies With Safe and Sound Banking Practices

The regulators aim to align the crypto assets-related activities from banks with safe and sound banking practices. The crypto services provided by banks should comply with consumer protection, legal permissibility, and other applicable laws and regulations.

According to the statement, “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 expects to see mass de-risking of blockchain-related companies by banks. In contrast, others believe institutions will figure out safe and proper practices.

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In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.

Harsh Notariya
Harsh started investing in crypto during the 2021 bull market. He took the opportunity of the market crash in May to learn more about Bitcoin and blockchain technology. Since...