On January 3, US Federal bank regulatory agencies issued a Joint Statement on the risks of crypto-assets to banking organizations. In light of the significant volatility and vulnerability in the sector as demonstrated by the recent failures of several large crypto-asset companies, the statement alerts to a number of key risks, including:

• Risk of fraud and scams

• Legal uncertainties related to custody practices, redemptions, and ownership rights

• Inaccurate or misleading representations and disclosures

• Significant volatility in crypto-asset markets

• Susceptibility of stablecoins to run risk

• Contagion risk within the crypto-asset sector

• Concentration risks

• Lack of maturity and robustness of risk management and governance practices

• Risks associated with open, public, and/or decentralized networks, including the lack of governance mechanisms and oversight

The statement calls for banking organizations to ensure that crypto-asset-related activities be performed in a “safe and sound manner, are legally permissible, and comply with applicable laws and regulations”. In addition, the banking organizations should ensure appropriate risk management and monitoring to effectively identify and manage risks.