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The Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve Tuesday issued a joint statement to banks highlighting the potential risks of participating in crypto-related activities. While the statement does not dissuade financial institutions from participating in such activities, it does reference the volatility of the cryptocurrency industry as seen in 2022, noting that recent events “highlight a number of key risks associated with crypto-assets and crypto-asset sector participants that banking organizations should be aware of.”

These include risks related to fraud and scams among crypto-asset participants, legal uncertainties related to custody practices and ownership rights, as well as inaccurate or misleading representations 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."

“The agencies will continue to closely monitor crypto-asset-related exposures of banking organizations,” the agencies added. “As warranted, the agencies will issue additional statements related to engagement by banking organizations in crypto-asset-related activities.”

The statement’s commentary regarding risk management matches the tone of NCUA’s Letter to Credit Unions, issued last year, which contained NAFCU-sought clarity regarding the authority of credit unions to establish relationships with third-party providers that offer digital asset services to federally-insured credit union members. This includes third-party provided services to allow credit union members to “buy, sell, and hold uninsured digital assets” with the third-party providers. Digital Assets are one of the terms used to describe distributed ledger technology based tokens.

Of note, NCUA Vice Chairman Kyle Hauptman shared insights on digital assets and crypto innovation with NAFCU Vice President of Regulatory Affairs Ann Petros in a previous episode of NAFCU’s Credit Union Policy Podcast (CUPP). 

NAFCU has engaged several federal agencies including the Federal Reserve, Treasury Department, and Commerce Department to provide feedback on the responsible development of digital assets. The association met with Treasury officials last month to discuss digital assets and regulatory efforts to ensure the safety and soundness of the financial services industry as more digital asset companies enter the market.

The association will continue to work with lawmakers and regulators to ensure a level playing field and appropriate regulations exist within the financial services industry.