Regulators warn banks about crypto risks. It is the latest sign of a broad attack.
Top federal regulators on Thursday warned banks about the risks of taking deposits from crypto firms, adding similar guidance that some in the digital-asset industry have argued is making it harder to find banks willing to do business with them.
In a joint statement, the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency that certain types of deposits from crypto companies – such as those held for customers and reserves for so-called stablecoins – were vulnerable to rapid inflows and outflows, and that banks had to be particularly aware of the liquidity risk they entail.
The regulators did not cite any specific banks, but some have recently come under stress after experiencing rapid withdrawals from crypto customers. In January, Silvergate Capital (ticker: SI ) revealed a bank run that saw deposits fall by $8.1 billion to $3.8 billion. Signature Bank (SBNY), which last year unveiled a plan to pivot away from digital assets, said the same month that crypto deposits had fallen by $12 billion.
Thursday’s statement is the latest sign of a broad attack by the federal government against crypto firms. In January, the same banking regulators issued a joint statement saying they were “carefully reviewing any proposals by banking organizations to engage in activities involving crypto-assets.”
Later that month, the Fed rejected the application of crypto-focused Custodia Bank to gain access to the internal payment systems used by the banks. The White House also recently argued that the crypto industry needs more consumer protections, and the Securities and Exchange Commission has filed enforcement actions against firms that offer products it says should be registered with the agency.
The statement on Thursday said banks were not discouraged or prohibited from doing business with any industry and that the letter was only to remind “banking organizations to apply existing risk management principles; it does not create new risk management principles.” But some crypto firms have said it has become increasingly difficult to open a checking account at some banks. Some venture capitalists say bank access is now a standard part of due diligence before making a crypto investment.
Analysts have said the perceived crypto breakout could spell trouble for token prices and firms like Coinbase Global ( COIN ), which monetize products like stablecoins and return-generating staking services that have recently come under scrutiny by the SEC.
Raymond James analysts, who have an Underperform rating on Coinbase, wrote this week that in the long term they “remain very concerned about the potential for significant regulatory risks” to the company.
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Coinbase executives have asked the SEC and lawmakers to provide clearer guidance on what crypto firms must do to comply with the law.
Write to Joe Light at [email protected]
