Those who have been prevalent in the cryptocurrency realm for quite some time are aware of the risks associated with it. Even though many don’t pay enough attention to these risks, one can’t completely ignore that they exist.
2022 has been both risky and disastrous for a number of reasons. The prolonged bear market, the fall of the Terra ecosystem, followed by the bankruptcy of several firms, the fall of the FTX exchange, and other ripples of these events brought several risks to investors, firms, and the industry as a whole.
In one of their latest joint statements, the Federal Reserve, the Federal Deposit Insurance Corporation, and the office of The Comptroller of the Currency laid out several risks associated with cryptocurrencies.
Statement on cryptocurrency risks is a follow-up of last year’s events
“The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector,” stated the agencies.
The statement highlights various risks associated with cryptocurrencies and their participants that banking organizations should be cautious of. One of the primary risks is of fraud and scams, which are prevalent in the cryptocurrency sector. Secondly, they mentioned the uncertainties regarding the legalities of custody practices, redemptions, and ownership rights.
“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system.” “The agencies are supervising banking organizations that may be exposed to risks stemming from the crypto-asset sector,” stated the agencies.
The statement also includes risks that speak about volatility, stablecoins, risk management, and various others. The agencies also urged banks to ensure appropriate risk management with proper policies and monitoring to mitigate and identify the risks. The statement by the agencies is a follow-up to several unforeseen events that happened in 2022.