US regulators have issued their first ever joint warning to banks over the risks associated with the cryptocurrency market. US regulators warn banks over cryptocurrency risks.
The watchdogs told financial institutions to be wary of potential fraud, legal uncertainty and misleading disclosures by digital asset firms. US regulators warn banks over cryptocurrency risks.
Banks were also cautioned over the “contagion risk” from the sector.
It comes just two months after the collapse of trading platform FTX sent shockwaves through the crypto industry.
In the joint statement, the US Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency said they were closely monitoring the crypto activities of banking organisations.
“The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector,” the statement said.
Banks were also encouraged to take steps to avoid problems in the digital asset market spreading to the wider financial system.
Tuesday’s statement comes after months of hesitancy by US financial industry watchdogs to issue uniform guidelines on cryptocurrencies, despite banks inviting clearer advice from regulators.
The cryptocurrency industry was rocked by the collapse of FTX in November.
It was the world’s second largest cryptocurrency exchange and the entry point for millions of people into the digital asset market.
He pleaded not guilty in a US court to claims that he took customer deposits at FTX to fund his other firm, Alameda Research, buy property and make political donations.
Two of Mr Bankman-Fried’s closest colleagues have already pleaded guilty and are cooperating with the investigation, which has shaken the entire cryptocurrency industry.
Mr Bankman-Fried was one of the most high-profile figures in the sector, known for his political ties, celebrity endorsements and bailouts of other struggling firms.
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