Federal bank regulators this week warned banks against investing in cryptocurrencies that could herald more aggressive regulation.
According to press releases issued by the Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency, the guidance is based on recent “some It was issued after the failure of a major cryptocurrency company.
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 did it discourage 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.”
David Schwed, COO of blockchain security firm Halborn, said: “This statement is a little ominous as far as cryptocurrency risk is concerned, with no advice on how to deal with it.” It shows that the authorities are actively involved in restoring market stability.”
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, The White House, along with crypto enthusiast and celebrity investor Kevin O’Leary, called for more regulation of cryptocurrencies.
More needs to be done when it comes to regulation, Schwed addition, But he doesn’t expect “something to change dramatically” this year.
The gist of the statement is that banks need to be cautious when considering investing in crypto assets, said Mina Tadru, CEO of investment firm Tadrus Capital.
“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.
Sign up now: Get smart about money and your career with our weekly newsletter
Do not miss it: Mark Cuban still believes in crypto despite the demise of FTX. Here’s why.