US financial regulators call on banks to ensure legality of crypto activities

U.S. financial regulators, in their first statement since the FTX ( FTT-USD ) meltdown, advised banks exposed to the cryptocurrency sector to ensure that their activities are "legally permissible" and comply with applicable laws . The Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency in a joint statement said they believe that issuing/holding cryptos on an open, public and/or decentralized network is "highly likely to be inconsistent with safe banking practices". While they said banking organizations are "neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation", the agencies are reviewing how banks can engage in crypto-related activities while ensuring safety, consumer protection, and compliance with laws. "The agencies are supervising banking organizations that may be exposed to risks stemming from the crypto-asset sector and carefully reviewing any proposals from banking organizations to engage in activities that involve crypto-assets," the statement read. The regulators also raised safety and soundness concerns about the business models of crypto-related firms. The collapse of FTX has led to regulators and legislators stepping up scrutiny of the crypto industry. Specifically, the regulators said due to "recent failures of several large crypto-asset companies", they are maintaining a "careful and cautious approach" for crypto-related activities and exposures at banks. Sam Bankman-Fried, disgraced co-founder of the now-bankrupt FTX, reportedly pleaded not guilty to all criminal charges in federal court .