Crypto: US agencies warn banks on asset risks

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FED), and the Federal Deposit Insurance Corporation (FDIC) have published a joint statement as regards crypto-assets in the banking sector. Therein, the regulators outline the key risks associated with crypto-assets and corresponding activities and engagements in such assets including the following, among others:
– the risk of fraud and deception (due to a lack of ownership transparency);
– the risk of misinformation and theft or loss of assets;
– the risk of severe losses and operational continuity caused by extreme market volatility of some assets; or
– the risk of malpractice in terms of risk management and governance by crypto-asset service providers.
Furthermore, the regulators remind financial institutions that – before they engage in any crypto-asset related activities – they shall ensure that they comply with all federal, state, and local regulations in this context and that any such engagements are sufficiently monitored and risk-managed to ensure a fair treatment of their customers.
The regulators conclude by noting that engagement in crypto-asset services is NOT prohibited as of now, but they will keep a close eye on banks‘ risk management practices in this context, including their policies and procedures for effective risk identification and mitigation.