US federal agencies release joint statement on crypto asset risks and safe practices

United States federal bank regulatory agencies started off the new year with a statement on crypto assets looking back at the troubles of the crypto sector in 2022. The Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) released a joint statement on Jan. 3 on past problems and their efforts to maintain sound banking practices in spite of those challenges.

“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” the agencies stated. They identified eight specific risks, including fraud, volatility, contagion and similar familiar issues.

The agencies also noted that, “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,” but took aim squarely at the sector with a stark warning:

“Based on the agencies’ current understanding and experience to date, 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 statement hinted at the state of crypto regulation in the United States and the possibility of it changing with references to agencies’ “case-by-case approaches to date”:

“Through the agencies’ case-by-case approaches to date, the agencies continue to build knowledge, expertise, and understanding of the risks crypto-assets may pose to banking organizations, their customers, and the broader U.S. financial system.”

All of the banking regulatory agencies have expressed misgivings about crypto before. Their attitudes are not monolithic, however. A representative of the FDIC has spoken positively of stablecoins, for example. The OCC has taken steps recently to engage more actively with fintech, and the Fed has taken an active, if noncommittal, interest in central bank digital currency.

1/ The Federal Reserve, the FDIC and the OCC just released this devastating Joint Statement on Crypto-Asset Risks to Banking Organizations. https://t.co/nvmpg0Qpf4

— Margaret Rosenfeld (@RosenfeldM) January 3, 2023