Federal Regulators Warn Banks About Crypto-Asset Risks: The US government has issued its first-ever unified warning to financial institutions about the dangers of the cryptocurrency market. In a warning to financial institutions, regulators expressed concern about fraud, legal uncertainty, and deceptive disclosures made by digital asset companies.
The “contagion risk” from the sector was also highlighted as a warning for banks. Just two months after the collapse of the trading site FTX, the cryptocurrency sector is rocked again. The US Federal Reserve, FDIC, and OCC all issued a joint statement saying they were keeping a careful eye on the crypto operations of financial institutions.
Statement authors noted that “substantial volatility and the exposing of vulnerabilities in the crypto-asset market” defined the last year. Crypto tokens, which are kept on public, decentralized networks, were also deemed “very likely to be inconsistent with safe and sound banking operations” by the regulators.
To prevent the digital asset market’s troubles from spreading to the broader financial system, banks were also urged to take action. It also stressed the importance of preventing “risks relating to the crypto-asset industry that cannot be managed or controlled” from spreading to the banking sector.
Despite banks wanting clearer advice from regulators, US financial sector watchdogs were hesitant to give universal recommendations on cryptocurrencies until Tuesday’s declaration.
FTX’s demise in November sent shockwaves through the cryptocurrency market. There were millions of people who were first introduced to the digital asset market through this exchange, which was the second largest in the world.
Former FTX CEO Sam Bankman-Fried refuted fraud charges brought against him in a statement released on Tuesday. Claims that he used FTX client funds to start Alameda Research, buy real estate, and make political contributions prompted him to enter a not-guilty plea in a US court.
The whole bitcoin sector has been rocked by the guilty pleas and cooperation of two of Mr. Bankman-closest Fried’s colleagues. Mr. Bankman-Fried was a major player in the industry because of his political connections, celebrity sponsorships, and willingness to bail out failing businesses.
The United States has accused him of “constructing a sham on a bedrock of lies, all the while assuring his clientele that their investment was one of the most secure in the crypto industry.” Please tell your friends about this if you think it’s interesting. Go to Lighthousejournal.org for the latest updates and news about celebrities.