WASHINGTON: Regulators in the United States have issued their first-ever joint warning to banks over the risks associated with the cryptocurrency market, local media reported.
The regulators warned financial institutions to be careful of potential fraud, legal ambiguity, and false declarations by digital asset providers, BBC reported. According to The BBC, banks were also warned about the "contagion danger" from the industry.
It happens just two months after the bankruptcy of the trading site FTX rocked the cryptocurrency sector. The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the US Federal Reserve all stated that they were closely observing the cryptocurrency operations of banking organisations.
"The last year's events have been characterised by high volatility and the exposing of weaknesses in the crypto-asset industry," the statement.
The regulators added that it was "very likely" that issuing or storing crypto tokens, which are held on open, decentralised networks, would be at odds with safe and sound banking standards, according to The BBC.
Banks were also encouraged to take steps to avoid crisis in the digital asset market spreading to the wider financial system. "It is significant that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system," it added.
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