Agencies-Gaza post
US Federal Reserve warns banks of cryptocurrency sector risks
The US Federal Reserve on Tuesday warned banks of the risks associated with getting involved in the crypto-asset sector.
It said that while the emerging sector “offers potential opportunities” for banks, their customers and the financial system as a whole, “activities related to crypto assets may also pose risks related to safety, consumer protection and financial stability.”
In a supervisory letter, it added that it was “closely monitoring” developments in the sector “in view of the increased and new risks posed by crypto assets.”
It also explained that banks wishing to get involved in the crypto-asset sector should inform the Federal Reserve of such plans ahead of time. Banking institutions should also ensure that these activities are legal before engaging in them.
Cryptocurrency such as Bitcoin and Ether have transformed from a niche phenomenon into a permanent fixture in the financial market in recent years, with banks increasingly wanting to participate in the emerging sector.
Cryptocurrency prices fluctuate greatly, and the sector is very volatile. The recent massive cryptocurrency market crash has left small investors suffering the worst of the losses.
Regulators such as the Federal Reserve are under pressure to plug regulatory gaps in the sector.
