Federal Reserve Recommends Banks Stay Away From Crypto

Regulators It is advised banks Other financial institutions to avoid cryptocurrenciesThis warning comes after the implosion digital asset company FTX, and deliberations about a possible central bank digital money in the United States.

A joint statement From the Federal ReserveThe Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency The nascent sector is described as “significant volatility” Warning executives of possible fraud and legal uncertainties, as well as contagion among firms affected by recent turmoil in cryptocurrency markets.

“Given the significant risks highlighted by recent failures of several large crypto-asset companies, the agencies continue to take a careful and cautious approach related to current or proposed crypto-asset-related activities and exposures at each banking organization,” The document said. “The agencies have significant safety and soundness concerns with business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector.”

Though The document clarified that the offer of services to cryptocurrency companies and other engagements with the digital asset marketplace is prohibited. “neither prohibited nor discouraged,” The statement raised concerns about money laundering, which banks are determined to prevent. harsh penalties Executives who are negligent in discouraging this practice.

“The agencies will continue to closely monitor crypto-asset-related exposures of banking organizations,” The document has been added. “As warranted, the agencies will issue additional statements related to engagement by banking organizations in crypto-asset-related activities. The agencies also will continue to engage and collaborate with other relevant authorities, as appropriate, on issues arising from activities involving crypto-assets.”

Heightened After cryptocurrency exchange platform FTX suddenly went down, regulators begin to exert pressure declared bankruptcy A liquidity crisis can lead to bankruptcies. other exchange platforms. Sam Bankman-FriedFTX was founded by. accused Money laundering and fraud for allegedly mixing user money with a sister trading firm Alameda Research making investments with the assets.

Officials At the Federal Reserve Have long been interested in the creation a central bank digital currency that, unlike bitcoin and other decentralized currencies, would be managed and tethered by policymakers. Federal Reserve Chair Jerome Powell Has told Legislators that his “mind is open” A digital dollar, indicating that he was “legitimately undecided” Whether the “benefits outweigh the costs” Central bank digital currencies “We would want very broad support in society and in Congress,” He made a comment.

Shortly After FTX filed bankruptcy, the Federal Reserve Bank This is New York Announced a partnership with top financial institutions like BNY Mellon And Mastercard To launch a digital dollar simulation. The Test will “experiment with the concept of a regulated liability network,” A concept for a market structure that would facilitate “digital asset transactions that connect deposits held at regulated financial institutions using distributed ledger technology.”

Critics According to central bank digital currencies, digital assets pose privacy and security risks. Republican Members of the House Financial Services Committee Have issued a series of principles that any potential digital dollar project must fulfill, including the establishment of privacy guarantees, the promotion of private sector innovation, and the protection of the dollar as the world’s reserve currency.

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