The Federal Reserve along with other federal agencies have issued a joint statement warning banks against using cryptocurrencies just as the Fed is deliberating over possibly issuing a central bank digital currency (CBDC) in the United States.
The Fed was joined in its statement by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). The Fed and the other two agencies claim market events related to 2022's "crypto winter" are what prompted them to take this step to warn banks against dealings with the crypto industry. They cited alleged concerns with the safety and soundness of banks with business models that are highly concentrated in crypto.
"The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector," reads the joint statement. "These events highlight a number of key risks associated with crypto-assets and crypto-asset sector participants that banking organizations should be aware of."
The Fed, FDIC and OCC described the cryptocurrency industry as being characterized by possible fraud, rife with scams and legal uncertainties and vulnerable to a contagion effect where if one crypto firm was suddenly rocked by scandals, it detrimentally affects other companies.
"Given the significant risks highlighted by recent failures of several large crypto-asset companies, the agencies continue to take a careful and cautious approach related to current or proposed crypto-asset-related activities and exposures at each banking organization," reads the statement.
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The three agencies stressed in the statement that offering services to crypto companies or otherwise engaging with them or the digital asset market is "neither prohibited nor discouraged."
But the statement also notes that regulators are supervising banks that are supposedly unduly exposed to crypto-related risks and are carefully reviewing proposals of major banks to engage in crypto activities. "It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system."
The Fed, FDIC and OCC said they will issue further statements on banks' crypto-related activities as warranted, and will continue to work with other agencies on issues related to the crypto industry.
Fed considers developing its own digital currency
As the Fed issues this joint warning regarding cryptocurrencies, it is also considering the creation of its own CBDC that would be managed directly by policymakers, tethered to the value of the American dollar and entirely controlled by the government. (Related: Coming economic collapse will be used to close banks and introduce central bank digital currencies.)
Fed Chair Jerome Powell has told lawmakers that his "mind is open" to the creation of a government-controlled digital dollar, noting that he was "legitimately undecided" on whether the benefits of creating a CBDC outweigh the costs.
"We should want very broad support in society and in Congress," he remarked.
It should also be noted that while cryptocurrency exchange platform FTX was filing for bankruptcy amid the company's scandals coming to light, the Federal Reserve Bank of New York announced a partnership with several leading financial institutions, including Mastercard and BNY Mellon, to launch a pilot program for a digital dollar.
This test will "experiment with the concept of a regulated liability network," a concept for a market infrastructure that could facilitate future transactions with digital assets that connect their deposits held at regulated financial institutions using blockchain technology.
For more stories about digital currencies, visit CryptoCult.news.
Watch this clip from InfoWars featuring host Alex Jones warning that the digital currency system isn't coming – it's already here.
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