Cryptocurrencies pose a risk, US regulators warn

Banks should also be wary of contagion risk from the sector, regulators said. They added that they are closely monitoring the activities of banks in the cryptocurrency market. The news comes two months after the collapse of trading platform FTX sent a shockwave through the cryptocurrency industry.

Regulators have also said that issuing or holding tokens — crypto-assets that represent digital currencies stored on decentralized public networks — is very likely to violate sound and secure banking practices. Banks have also been urged to take steps to prevent problems in the digital asset market from affecting the financial system. It is important that risks associated with the cryptocurrency industry, which cannot be mitigated or controlled, are not passed on to the banking system, the statement said.

The joint move by regulators comes after months of hesitation by US financial watchdogs to issue uniform guidelines on cryptocurrencies, despite banks asking regulators for clearer advice, the BBC reported.

The cryptocurrency industry was rocked by the collapse of FTX in November, which was the second largest cryptocurrency exchange in the world and the gateway to the digital asset market for millions.

Take for example the significant fall of Bitcoin. Even before the FTX crash, the world’s most popular cryptocurrency traded for CZK 522,150, but subsequently the value fell below CZK 400,000, which was the worst result since the end of 2020.

On Tuesday morning, the exchange rate was only 382,340 CZK. Exactly one year ago, the value was 1,003,990 CZK. The all-time record so far was set by the world’s most popular cryptocurrency in November 2021 when it was bid for CZK 1,427,350.

FTX CEO Sam Bankman-Fried on Tuesday denied allegations that it defrauded clients and investors. Two of his closest colleagues have already pleaded guilty and are collaborating in the investigation.