US Financial Watchdogs Highlight Risks of Investing in Cryptocurrencies

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Global financial authorities have taken the recent cryptocurrency developments as a crucial moment to revisit crypto regulations and issue warnings on digital assets’ related risks, including liquidity crunch and extremely high volatility to banking organizations. The collapse of Terra Luna UST and FTX, which combined involved over $100 billion, are the key events used to issue crypto warnings. 

A recent report by JPMorgan indicated that more crypto regulations are upcoming, particularly focused on the staking and stablecoins industry. As a result, crypto staking giant Lido Finance recently stated the SEC’s crackdown on staking programs could eventually lock out U.S digital asset investors.

IMF and U.S Federal Agencies  Warns of Crypto-Related Risks

According to a statement issued by the Executive Board of the International Monetary Fund (IMF) on Thursday, digital assets should not be granted official currency or legal tender status in order to safeguard monetary sovereignty and stability. The IMF recognized that the cryptocurrency market has immense potential to disrupt global monetary stability.

Additionally, the IMF addressed questions raised by member countries on the benefits and risks of crypto assets and how to structure appropriate policy responses. Notably, the IMF operationalizes the principles outlined in the Bali Fintech Agenda (IMF and World Bank 2018) and includes macro-financial considerations such as implications for monetary and fiscal policies.

“Efforts to put in place effective policies for crypto assets have become a key policy priority for authorities, amid the failure of various exchanges and other actors within the crypto ecosystem, as well as the collapse of certain crypto assets. Doing nothing is untenable as crypto assets may continue to evolve despite the current downturn,” the IMF noted.

Notably, a joint statement from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) cautioned banking organizations to approach the crypto market with much discretion.