WBK Industry News - Federal Regulatory Developments

Federal Banking Agencies Issue Joint Statement Regarding Crypto-Asset Risks

On January 3, 2023, the Federal Reserve Board, FDIC, and OCC (collectively, the Agencies) issued a joint statement highlighting banking organizations’ key risks associated with crypto-assets and describing the Agencies’ approach to supervising in the crypto-asset sector.

The joint statement outlines key risks that the Agencies believe banking organizations should be aware of, including:

  • Risk of fraud and scams among crypto-asset sector participants;
  • Legal uncertainties related to custody practices, redemptions, and ownership rights;
  • Inaccurate or misleading representations and disclosures by crypto-asset companies;
  • Significant volatility in crypto-asset markets;
  • Susceptibility of stablecoins to run risk;
  • Contagion risk within the crypto-asset sector resulting from interconnections among certain crypto-asset participants;
  • Risk management and governance practices in the crypto-asset sector exhibiting a lack of maturity and robustness; and
  • Heightened risks associated with open, public, and/or decentralized networks, or similar systems.

The joint statement reports that the Agencies’ will continue closely monitoring crypto-asset-related risks to banking organizations, their customers, and the U.S. financial system as a whole.

Additionally, the Agencies are assessing banking organizations’ abilities to conduct crypto-asset-related activities in a safe manner that adequately addresses consumer protection and complies with applicable laws and regulations.  According to the joint statement, the Agencies currently 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.”