Federal Reserve Recommends Banks Stay Away From Crypto As Possible ‘Central Bank Digital Currency’ Is Weighed

Regulators It is advised banks Avoid other financial institutions 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” and possible fraud, warning executives about scams, legal uncertainties and contagion between companies rocked by recent turmoil in the 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 stated. “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 the possibility of money laundering risks that banks are keen to avoid. harsh penalties For executives who were negligent in discouraging the practice.

“The agencies will continue to closely monitor crypto-asset-related exposures of banking organizations,” The document was 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 the sudden collapse of cryptocurrency exchange platform FTX, regulators are under pressure declared bankruptcy A liquidity crisis can lead to bankruptcies. other exchange platforms. Sam Bankman-FriedFTX’s founder,, was accused Money laundering and fraud for allegedly mixing user money with a sister trading firm Alameda Research and using the assets for investments.

Officials At the Federal Reserve We have been considering the creation of a central bank digital money. This currency, unlike bitcoin, would be managed by policymakers, and tied to the dollar. Federal Reserve Chair Jerome Powell Has told His lawmakers “mind is open” A digital dollar, indicating that he was “legitimately undecided” On whether the “benefits outweigh the costs” Digital currencies of the central banks “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 infrastructure which would facilitate “digital asset transactions that connect deposits held at regulated financial institutions using distributed ledger technology.”

Critics Digital currencies of the central banks claim that digital assets can pose security and privacy concerns. Republican Members of the House Financial Services Committee We 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.