US regulators warn banks of liquidity risk associated with cryptocurrencies

US regulatory authorities – the Fed, Office of the Controller of the Currency, and Federal Deposit Insurance – are warning banks of increased liquidity risk in deposits associated with cryptocurrencies.

Concerns, and even alarm, have arisen in the crypto industry speculating that US regulatory authorities may cut off crypto firms' access to the banking system – a potential death blow that would limit investors' ability to exchange assets such as bitcoins for dollars.

The trio of regulatory bodies, including the Federal Reserve, are warning banks to be cautious of liquidity risk associated with cryptocurrencies, which is the latest step by US officials to reduce the economy's vulnerability to the turbulent market. The Fed, Office of the Controller of the Currency, and Federal Deposit Insurance said in a joint statement that banks should apply effective risk management in the case of deposits related to crypto entities. These include rigorous due diligence and monitoring of crypto entities that establish deposit accounts, as well as taking into account the potential volatility of these deposits in routine stress tests.

(ISBnews)