FED SCRUTINY INCREASES ON BANKS OPENING UP TO CRYPTO

Three U.S. regulators-the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC)-have issued a joint statement highlighting the “key risks” associated with crypto-assets.
This comes in light of the events of the past year, such as the FTX bankruptcy, and the Luna and Three Arrow Capitals cases, as well as the various other cryptocurrency lending protocols that have required a significantly higher threshold of attention from the Authorities.
The statement said that regulators will not prohibit or discourage banking organizations from engaging in the cryptocurrency sector. But they will closely monitor banks with crypto exposures.

The willingness to guard the sector more peremptorily also comes from the obvious openings to the crypto sector by very prominent Banks: in February 2021 Bny Mellon announced the ability to transfer and issue cryptocurrencies on behalf of its clients.

A revolutionary move considering that we are talking about the oldest U.S. bank, but a forerunner of a new way of thinking, so much so that in March 2022 it entered into a partnership with Chainalysis, precisely in response to a desire to assess broader cryptocurrency trends and grassroots activity to support its compliance and due diligence practices. Fast forward to last October when it launched its cryptocurrency custody service with Bitcoin and Ethereum being the first cryptocurrencies to benefit from this opportunity.

After Bny Mellon, JpMorgan, and Morgan Stanley approached the crypto sector with increasing determination. In April 2022, U.S. investment banking firm Goldman Sachs created a Bitcoin-backed cash loan product.

Therefore, the Authorities are continuing to examine whether the current crypto activities put in place by banking organizations, can be conducted with proper consideration of safety and soundness, in order to prevent crypto-asset risks from shifting to the banking system.