Federal Reserve: Banks need to pay attention to the inherent risks of cryptocurrency and related asset transactions
It is reported that the Federal Reserve issued a new statement on Thursday (February 23) local time to remind banks of the inherent risks of cryptocurrency and related asset transactions. The statement said that due to the unpredictability of the scale and time of deposit inflow and outflow, some capital sources from entities related to encrypted assets may bring higher liquidity risk to banking institutions. The stability of such deposits may be related to the demand for stable currency, the confidence of stable currency holders in stable currency arrangements, and the reserve management practices of stable currency issuers. At the same time, banks are also advised to pay attention to those cryptocurrency companies that inaccurate or misleading indicate their deposit insurance status. The Federal Reserve stressed the volatility of the cryptocurrency market, the risk of bank runs, and the market pressure and customer panic and uncertainty caused by market events such as the decoupling or “dislocation” of the Terra USD (USD) stable currency from the US dollar.
Interpretation of this information:
The Federal Reserve has issued a statement reminding banks of the risks associated with cryptocurrency and related asset transactions. The statement emphasizes the unpredictable nature of deposit inflow and outflow, which can result in higher liquidity risk for banking institutions. The stability of these deposits is dependent on factors such as demand for stable currency, confidence in stable currency arrangements, and reserve management practices of stable currency issuers. The Federal Reserve also cautions banks against inaccurate or misleading deposit insurance status claims made by cryptocurrency companies. The statement highlights the volatility of the cryptocurrency market, the risk of bank runs, and the potential for market pressure, customer panic, and uncertainty caused by events such as the decoupling or “dislocation” of stable currencies from the US dollar.
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