Cryptocurrencies Have Been Highlighted By The US Regulators As Possible Fraud

Cryptocurrencies Have Been Highlighted By The US Regulators As Possible Fraud by BarronsNewscom

Due to the current situation among cryptocurrency companies, a United States authority advised banks to be cautious in digital asset markets, including discussing any new plans with regulators.

The Office of the Comptroller of the Currency said that in the cryptocurrency industry, managing risks is a process that lacks maturity; added to this, the problems one company suffers can expand to another.

The OCC stated in a report that many of the people participating in the cryptocurrency market are not prepared for all the stress and surprises generated during the year, which has resulted in a loss for millions of consumers.

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Before expanding existing businesses or engaging in ones with digital assets, banks are advised to take a careful approach to ensure proper practices are in place.

The OCC advised national banks to discuss any plans for digital assets with regulators.

The news for the past few weeks is flush with the implosion of FTX, which, until November, was one of the largest exchanges. FTX founder Sam Bankman-Fried said he spent no time or effort trying to manage risk on the stock market, saying the crash could have been avoided if he had spent an hour a day thinking about risk management. He added that he could not explain what happened to the billions of dollars FTX clients sent to his trading company’s bank accounts.

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The risk of contagion in the crypto industry was high due to the interconnection between certain crypto industry players through “opaque lending and investment agreements,” the OCC said in its notice.

+The OCC’s call for a precautionary approach by financial institutions comes as various agencies grapple with how digital assets might fit into a regulatory system built for traditional finance.

Six months ago, the same OCC pointed out the risks of cryptocurrencies and said that cryptocurrency products and services could “create opportunities for banks and their customers.”

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Major state-level regulator, The New York State Department of Financial Services, said last week that it intended to add staff to its virtual currency regulatory team but stressed that its licensing system had helped keep companies to high standards.

The Securities and Exchange Commission has yet to see a major cryptocurrency exchange, also facing pressure to step up its enforcement. Former chairs of the Securities and Exchange Commission and the Commodity Futures Trading Commission have also jointly called for stricter regulation.