US regulators warn banks about the risks of cryptocurrencies

The first joint warning from US regulators to banks about the risks of the cryptocurrency market has been rent

Financial institutions were told to be wary of digital asset firms because they might try to scam them or give them false information. Banks were also warned about the sector’s “contagion risk”. It comes just two months after the collapse of FTX, which sent shockwaves through the cryptocurrency industry.

The US Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency stated in a joint statement that they were closely monitoring the crypto activities of financial institutions. The regulators also stated that issuing or holding crypto tokens that are stored on public decentralized networks is “likely compatible with safe and sound banking practices.” Banks were also told to stop problems on the market for digital assets from spreading to the rest of the financial system.

The statement came out on Tuesday after regulators in the US financial industry hersitated for months to give uniform rules about cryptocurrencies, even though banks had been asking regulators for clearer advice.