By The Financial express
In a joint statement released on January 3, the US Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) cautioned banks about the dangers associated with cryptocurrencies, as reported by Cryptoslate.
According to the statement, the past year’s high volatility in cryptocurrency prices exposed vulnerabilities in the market.
Therefore, when dealing with cryptocurrency, banks should be aware of a few key risks that the regulatory authorities have highlighted.
Cryptoslate further noted that the authorities warned that banks doing business with crypto firms run the risk of falling victim to fraud and scams.
Additionally, the most recent bankruptcy of FTX and the allegations of fraud against its founder Sam Bankman-Fried (SBF) may have spurred the regulators to caution banks about these dangers.
According to the statement, banks should be cautious of risks brought on by ambiguous legal regulations surrounding cryptocurrency custody services, redemptions, and ownership rights.
The regulators issued a warning that cryptocurrency firms might give banks false disclosures and representations. Misrepresentations regarding federal deposit insurance and other “unfair, deceptive, or abusive” business practises that may endanger consumers may fall under this category.
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