FDIC’s Crypto Comment: It Poses a Risk to the Banking System

The Federal Deposit Insurance Institution, which in March seized and sold off some banks amid the banking crisis in the United States, also mentioned cryptocurrencies in its risk analysis report for 2023.

The institution, which insures deposits as well as oversees financial institutions, devoted a section of the report entirely to cryptocurrencies. Stating that cryptocurrencies can pose credit, market and operational risks for banks, the regulator said that 2022 was a year of multiple bankruptcies in this sense, and that they saw an increase in crypto activities due to their own regulatory mechanisms.

As is known, the collapse of Terra Luna in May 2022 led to a massive drop in cryptocurrencies, which caused the bankruptcy of many companies, also known as “crypto banks”, and left behind thousands of victims. These declines in crypto had their share in the bankruptcies of institutions such as Silvergate and Silicon Valley Bank that serviced the sector.

“Needs more information and control…”

Despite all this, the FDIC said that some banks are willing to do crypto-related business, and that number is growing:

“Despite all these bankruptcies, there is a growing number of banks willing to serve crypto-related activities. More information and controls are needed to see the risks more clearly.”