In the first week of the new year, the U.S. banking regulators wanted financial institutions about the exposure of scams and fraud. It happened as a response to the array of risks occurring after the collapse of FTX. The Federal Reserve, the Office of the Comptroller and the Currency and Federal Deposit Insurance spoke in a joint statement. They believed that volatility hit the past year, so further vulnerability might occur significantly in the crypto-asset sector. This statement was delivered just a few weeks after the FTX fall.
The regulators mentioned a few risks that cover fraud and scams within crypto-asset sector participants. They also added that risk like contagion risk in the crypto-asset sector result from the interconnections between particular crypto-asset participants. Actually when crypto was a trend, financial players announced new crypto partnerships weekly. Bank executives for instance urged that they needed further guidance from regulators. This is to make sure everything before dealing more with bitcoin and cryptocurrencies both in retail and institutional trading business.
Now, everyone could see that after two months following FTX bankruptcy, the industry has poor risk management, interconnected risk, plus outright fraud. In the statement, the regulators said that they continue to assess banks on how they adopt crypto while following various mandates. They must give clues on where to go next, especially consumer protection as well as anti-money laundering. In a statement, regulators said that banking practices would have a difficult time adapting to the inconsistent crypto-assets. Because agencies must have the current understanding and experience to date on holding the crypto-assets as they use decentralized network systems.
