Banks face risks 'due to the unpredictability of the scale and timing of deposit inflows and outflows' from the crypto world, regulators said.
The three major branches of the federal government that regulate U.S. banks are urging lenders to brush up on their risk-management practices for handling cryptocurrency assets.
The move comes as traditional financial institutions such as S&P 500 component Signature Bank SBNY have handled billions in customer withdrawals in the wake of the bankruptcy of crypto company FTX last year and in a climate of volatility in digital-asset prices. “The stability of such deposits may be driven by the behavior of the end customer or crypto-asset sector dynamics, and not solely by the crypto-asset-related entity itself, which is the banking organization’s direct counterparty,” the statement said.
The Fed also recommended that banks perform “robust” due diligence and ongoing monitoring of crypto-asset-related entities that establish deposit accounts, including assessing representations made by crypto-asset-related entities to their end customers about deposit accounts.
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