Home Regulation US watchdogs issue joint warning to banks over liquidity risks stemming from crypto, stablecoin reserves

US watchdogs issue joint warning to banks over liquidity risks stemming from crypto, stablecoin reserves

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U.S. regulators issued a joint statement to banks on Feb. 23, warning them of the liquidity risks posed by cryptocurrency-related customers and their deposits, Reuters reported.

The letter, issued by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, contained a warning about stablecoin reserves for the first time in history.

The statement, issued in the wake of recent events highlighting volatility issues in the industry, mandates new actions or restricts banks from servicing the sector, the regulator said. It’s not something to do.

The watchdog has asked banks to ensure their monitoring tools are up-to-date and able to verify the health of their crypto-related funds and deposits. They added that banks could face increased outflows from deposits made for retail investors and stablecoin reserves.

The regulator added that stablecoins like cryptocurrencies could be at risk of mass outflows during uncertain times, leading to large and unexpected redemptions.

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