Ether has outperformed bitcoin as the two cryptocurrencies are due to bottom out in June 2022. Ether’s superior gains have come as investors anticipate a major upgrade to the ethereum blockchain called a “merger.”
Getty Images
US banking regulators warned financial institutions on Tuesday that dealing with cryptocurrencies presents a range of risks, including fraud and fraud.
“The events of the past year have been marked by significant volatility and exposure to vulnerabilities in the crypto-asset sector,” said regulators in a joint statement from the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller. Currency. His comments came just weeks after the spectacular collapse of crypto exchange FTX.
The regulator said the risks include: “fraud and fraud between participants of the crypto-asset sector” and “the risk of contagion in the crypto-asset sector resulting from the interconnection between certain crypto-asset participants.”
During the crypto boom, when financial players seem to be announcing new crypto partnerships every week, bank executives say they need further guidance from regulators before dealing directly with bitcoin and other cryptocurrencies in their retail and institutional trading business.
Now, roughly two months after FTX’s bankruptcy, the industry has exposed what appears to be poor risk management, interconnected risks and outright fraud.
While the statement suggests that regulators are still evaluating how banks can use crypto while complying with various mandates for consumer protection and anti-money laundering, they appear to hint at the direction they are headed.
“Based on the agency’s current understanding and experience to date, the agency believes that issuing or holding a major crypto asset that is issued, stored, or transferred on an open, public, and/or decentralized network, or a very similar system. may not be consistent with safe and sound banking practices,” the regulator said.
He also said he has “significant safety and health concerns” with banks that focus on crypto clients or that have “concentrated exposure” to the sector.
Traditional banks have largely avoided the crypto crisis, unlike the 2008 financial crisis which played a major role. One exception has been Capital of Silvergate, whose stock has been battered in the past year.