Joint Statement on Crypto-Asset Risks to Banking Organizations

Source: Federal Reserve

Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency

January 3, 2023

Joint Statement on Crypto-Asset Risks to Banking Organizations

The Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit
Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC)
(collectively, the agencies) are issuing the following statement on crypto-asset[1] risks to banking organizations.

The events of the past year have been marked by significant volatility and the exposure of
vulnerabilities in the crypto-asset sector. These events highlight a number of key risks associated
with crypto-assets and crypto-asset sector participants that banking organizations should be
aware of, including:

• Risk of fraud and scams among crypto-asset sector participants.
• Legal uncertainties related to custody practices, redemptions, and ownership rights, some of
which are currently the subject of legal processes and proceedings.
• Inaccurate or misleading representations and disclosures by crypto-asset companies,
including misrepresentations regarding federal deposit insurance, and other practices that
may be unfair, deceptive, or abusive, contributing to significant harm to retail and
institutional investors, customers, and counterparties.
• Significant volatility in crypto-asset markets, the effects of which include potential impacts
on deposit flows associated with crypto-asset companies.
• Susceptibility of stablecoins to run risk, creating potential deposit outflows for banking
organizations that hold stablecoin reserves.
• Contagion risk within the crypto-assetsector resulting from interconnections among certain
crypto-asset participants, including through opaque lending, investing, funding, service, and
operational arrangements. These interconnections may also present concentration risks for
banking organizations with exposures to the crypto-asset sector.
• Risk management and governance practices in the crypto-asset sector exhibiting a lack of
maturity and robustness.
• Heightened risks associated with open, public, and/or decentralized networks, or similar
systems, including, but not limited to, the lack of governance mechanisms establishing
oversight of the system; the absence of contracts or standards to clearly establish roles,
responsibilities, and liabilities; and vulnerabilities related to cyber-attacks, outages, lost or
trapped assets, and illicit finance.

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 and carefully reviewing any

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1. By “crypto-asset,” the agencies refer generally to any digital asset implemented using cryptographic techniques.

https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20230103a1.pdf