Federal Bank Regulators Warned Banks About Crypto-Asset Risks

The Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency issued a joint statement on January 3, 2023 warning banking organizations about risks associated with crypto assets and crypto-sector companies.

Released at 2 p.m. Eastern Standard Time, the statement identified eight categories of concern and said the agencies would carefully review banks’ proposed crypto activities and exposures. It was a coordinated supervisory warning from the three principal federal banking regulators, not a new statute, formal rule or blanket prohibition on serving cryptocurrency businesses.

The distinction mattered after failures and market disruptions during 2022 exposed connections among trading venues, lenders, custodians, stablecoin arrangements and banks. The agencies were signaling that crypto-sector losses and operational weaknesses should not migrate into federally supervised banking organizations.

Eight risks entered the supervisory record

The agencies identified fraud and scams; legal uncertainty involving custody, redemptions and ownership rights; misleading disclosures, including representations about federal deposit insurance; market volatility affecting deposit flows; stablecoin run risk; contagion through opaque relationships among crypto companies; immature risk management and governance; and heightened operational and illicit-finance risks associated with open or decentralized networks.

That list combined risks originating inside crypto markets with transmission channels into banks. Stablecoin reserve deposits, for example, could leave a bank rapidly if token holders sought redemptions. Concentrated relationships among lenders, exchanges and service providers could expose a bank to multiple failures that appeared separate but were economically connected.

These were regulatory assessments, not quantified findings about every bank or crypto company. The January 3 statement did not disclose institution-level exposure data, estimate aggregate potential losses or report that a federally insured bank had failed because of crypto activity.

The strongest warning concerned banks’ own holdings

The agencies said that, based on their understanding and experience at the time, issuing or holding as principal crypto assets carried on an open, public or decentralized network was highly likely to be inconsistent with safe and sound banking practices. They also expressed significant concern about business models concentrated in crypto activities or exposures.

“Hold as principal” was an important boundary. It referred to a bank taking crypto assets onto its own account, rather than merely providing ordinary banking services to a lawful customer. The statement expressly said banking organizations were neither prohibited nor discouraged from serving customers of any specific class or type when permitted by law or regulation.

Even so, the combined message established a demanding supervisory posture. Banks contemplating crypto custody, token issuance or other digital-asset activities were expected to discuss their plans with regulators and demonstrate legal permissibility, consumer protection, board oversight, policies, controls, risk assessments and monitoring.

Why the statement mattered

The development placed a federal supervisory constraint around attempts to connect crypto markets with insured deposits, payment systems and bank balance sheets. It did not ban a particular token or determine whether any named company could obtain banking services. Its practical effect would depend on case-by-case examinations, chartering decisions and supervisory discussions that were not public in the January 3 record.

Contemporaneous Axios coverage interpreted the statement as likely to make regulated institutions more reluctant to serve crypto firms. That was a journalistic assessment, not a measured market result. No authoritative event-window study cited here isolates the statement’s effect on a cryptocurrency, bank share price, deposit balance, trading volume or volatility.

Later context

On April 24, 2025, the Federal Reserve and FDIC withdrew the January 3, 2023 statement; the OCC had already withdrawn from it as applied to institutions under its supervision. That later policy change does not alter what the statement communicated on January 3, 2023: federal banking regulators were presenting crypto exposure as an area requiring exceptional caution and close review.