US watchdogs issue joint warning to banks over liquidity risks stemming from crypto, stablecoin reserves

U.S. regulators issued a joint assertion to banks on Feb. 23 warning of liquidity dangers stemming from cryptocurrency-related purchasers and their deposits, Reuters reported.

The letter was issued by the Federal Reserve, the Federal Deposit Insurance coverage Company, and the Workplace of the Comptroller of the Forex and included a warning on stablecoin reserves for the primary time in historical past.

In accordance with the regulators, the assertion was issued within the wake of latest occasions that highlighted volatility points within the trade and doesn’t mandate any new actions or prohibit banks from offering providers to a sector.

The watchdogs urged banks to make sure their monitoring instruments are updated and in a position to verify the well being of any crypto-related fund or deposit. They added that banks may face rising outflows from deposits made for the good thing about retail traders and stablecoin reserves.

The regulators added that stablecoins — like cryptocurrencies — are susceptible to heavy outflows throughout occasions of uncertainty that may result in unanticipated redemptions on a big scale.

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