Three United States federal regulators have issued a warning to banks about crypto-related liquidity risks The warning relates to volatility in deposit inflows and outflows related to crypto-entities The United States federal regulators have released a statement warning banks about crypto-related liquidity risks. The regulators involved are the Board of Governors of the Federal Reserve […]
Three United States federal regulators have issued a warning to banks about crypto-related liquidity risksThe United States federal regulators have released a statement warning banks about crypto-related liquidity risks. The regulators involved are the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation , and the Office of the Comptroller of the Currency .
Meanwhile, the stablecoin reserve deposits depend on the demand for the coin and the confidence it has secured among crypto-users. These deposits could face large and rapid outflows in case of “unanticipated stablecoin redemptions or dislocations in crypto-asset markets”. The regulators stated banks could face heightened liquidity risk if their deposit funding is mainly from crypto-related firms.
“More broadly, when a banking organization’s deposit funding base is concentrated in crypto-asset-related entities that are highly interconnected or share similar risk profiles, deposit fluctuations may also be correlated, and liquidity risk therefore may be further heightened.” The regulators have urged banks to keep a tab on such liquidity risks and maintain effective risk management for crypto-related funding sources.Subscribe to get it daily in your inbox.
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