Federal bank regulators this week warned banks against investing in cryptocurrencies that could herald more aggressive regulation.
This guidance is in response to the recent “failures of several large cryptocurrency companies.” According to the press release Released by the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.
The regulator made no mention of the recent collapse of crypto exchange FTX, but said crypto firms are a “contagion risk” for banks due to poor oversight. They also raised other concerns, including fraud and fraud, legal uncertainty around cryptocurrency custody, and misleading statements by crypto companies.
More Crypto Regulation Ahead?
Regulators have warned that “risk management and governance practices” in the crypto space lack “maturity and robustness,” but by announcing new rules and regulations for banks investing in crypto assets. did not reach Nor have they dissuaded banks from partnering with cryptocurrency companies.
The regulator said it would take a “prudent and prudent approach” to each bank’s “crypto-related activities and exposures.”
“This statement is a little ominous when it comes to cryptocurrency risks, with no advice on how to deal with it,” said David Schweed, chief operating officer of blockchain security firm Halborn. It shows that we are actively involved in restoring stability to the
While the regulator’s warning “sheds light on the many risks associated with digital assets,” Schwed believes it is “only a generalized, high-level risk recommendation.”
Following the collapse of FTX, White House Called for more regulation of cryptocurrenciesas did Kevin O’Leary, Crypto Enthusiast and Investor.
More needs to be done when it comes to regulation, Schwed addition, But he doesn’t expect “something to change dramatically” this year.
Mina Tadru, CEO of investment firm Tadrus Capital, said the lesson to be learned from the statement is that banks need to be cautious when considering investing in crypto assets.
“This warning may increase the likelihood of increased regulation of cryptocurrency investments in the future,” said Tadru. Such regulations could include increased reporting and capital requirements, as well as restrictions on the types of investments banks can make in crypto assets.
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